Chapter 13 – Interest Rates And Monetary Policy

Question 0

Transaction demand for money

Answer 0

The amount of money people want to hold for use as a medium of exchange, and which varies directly with the nominal GDP

Question 1

Interest

Answer 1

The payment made for the use of money

Question 2

Asset demand for money

Answer 2

The amount of money people want to hold as a store value; varies inversely with the rate of interest.

Question 3

Total demand for money

Answer 3

The sum of the transactions demand for money and the asset demand for money

Question 4

Central bank

Answer 4

A bank his chief function is the control of the nation’s money supply; in Canada, the bank of Canada

Question 5

Bank deposits

Answer 5

Did you posit that individuals or firms have a financial institution or the banks have at the central bank

Question 6

Monetary policy

Answer 6

The central bank changing of the money supply to influence interest-rates and assist economy in achieving a full employment, non-inflationary level of total output

Question 7

Open market operations

Answer 7

The buying and selling of Canadian government bonds by the bank of Canada to carry out monetary policy

Question 8

Bank rate

Answer 8

The interest rate that the Bank of Canada charges on advances made to the chartered banks

Question 9

Operating band

Answer 9

The bank account it is 50 basis point range, one half of one percentage point, for the overnight lending rate

Question 10

Overnight lending rate

Answer 10

The interest rate at which major participants in the money market borrow and lend one day funds to each other

Question 11

Expansionary monetary policy

Answer 11

Bank of Canada actions that increase the money supply to lower interest rate and expand real GDP

Question 12

Prime interest rate

Answer 12

The interest rate banks charge that much credit where the borrowers; the benchmark interest-rate used by charter banks as a reference point for a wide range of interest rates charged on loans to businesses and individuals

Question 13

Restrictive monetary policy

Answer 13

Bank of Canada actions that contract, or restrict, the growth of the nation’s money supply for the purpose of reducing our eliminating inflation

Question 14

Taylor rule

Answer 14

A modern monitoring rule proposed by economist John Taylor that stipulates exactly how much a central bank should change interest rates in response to divergences a real GDP from potential GDP and a verdict is an actual rates of inflation from a target rate of inflation

Question 15

Cyclical asymmetry

Answer 15

The idea that monetary policy may be more successful in showing expansions and controlling the inflation them in extracting the economy from severe recession

Question 16

liquidity trap

Answer 16

A situation in which adding more liquidity to Banks has little or no additional positive effect on lending

Question 17

Inflation targeting

Answer 17

A bank of Canada policy of maintaining the inflation rate within a specific range, currently 1 to 3%