Chapter - 5

Question 1

A budget is said to be ___ when revenue equals spending

Answer 1

balanced budget

Question 2

The minimum rate at which the Bank of Canada makes short-term advances to the chartered banks, other members of Payments Canada and investment dealers who trade in the money market

Answer 2

Bank Rate

Question 3

One-hundredth of a percentage point of bond yields. Thus, 1% represents 100 basis points.

Answer 3

basis points

Question 4

Occurs when total spending by the government for the year is higher than revenue collected

Answer 4

budget deficit

Question 5

Occurs when government revenue for the year exceeds expenditures

Answer 5

budget surplus

Question 6

A cash management open-market operation pursued by the Bank of Canada to influence interest rates. It refers to the transfer of deposits to the Bank of Canada
from the direct clearers, effectively draining the supply of available cash balances. It also refers to peak-to-trough investment declines during a specific period, expressed as a percentage of the peak value. Individual drawdowns measure the percentage loss an investor would have realized if an investment was bought at its peak and subsequently sold at its lowest point.

Answer 6

drawdown

Question 7

An investment dealer appointed by a company or government to advise it in financial matters and to manage the underwriting of its securities

Answer 7

fiscal agent

Question 8

The policy pursued by the federal government to influence economic growth through the use of taxation and government spending to smooth out the fluctuations of the business cycle

Answer 8

fiscal policy

Question 9

A Payments Canada electronic system for the transfer of high-value payments between participating financial institutions. Also, a key tool used by the Bank of Canada to conduct monetary policy.

Answer 9

Lynx

Question 10

Economic policy designed to improve the performance of the economy by regulating money supply and credit. The Bank of Canada achieves this through its influence over short-term interest rates.

Answer 10

monetary policy

Question 11

The accumulation of total government borrowing over time. It is the sum of past deficits minus the sum of past surpluses.

Answer 11

national debt

Question 12

The interest rate set in the overnight market

Answer 12

overnight rate

Question 13

A transaction where the Bank of Canada offers to purchase securities from financial institutions with an agreement to sell them back the next business day at a predetermined price

Answer 13

overnight repo

Question 14

A transaction where the Bank of Canada offers to sell securities to financial institutions with an agreement to buy them back the next business day at a predetermined price

Answer 14

overnight reverse repo

Question 15

Established in the 1980 revision of the Bank Act, this association operates a highly automated national clearing system for interbank payments. Members include chartered banks, trust and loan companies and some credit unions and caisses.

Answer 15

Payments Canada

Question 16

An open-market cash management policy pursued by the Bank of Canada. A redeposit refers to the transfer of funds from the Bank to the direct clearers (an injection of balances) that will increase available funds

Answer 16

redeposit