chapter 6 part 3 Flashcards
what is the goal of monetary policy? what does the bank of canada use?
to keep the value of the dollar and keep inflation low and stable. using short-term interest rates
how does the bank measure its inflation targets?
using the year over year rate of the CPI. keeping inflation between 1-3%
how does the bank keep inflation within its target range?
if inflation is high they increase the short-term interest rate.
if inflation is low they lower short-term interest rates.
what is the over-night rate?
the interest rate financial institutions lend money at in the over-night markets.
what is the bank rate?
the lower interest rate the bank of canada will lend money on a short-term basis to banks and other members of the canadian payments association.
what are the 2 main functions of the bank of canada on the open market?
- Special purchase and resale agreements (SPRA) bank lends at lower rate to ease over-night rate highs.
- Sale and repurchase agreement (SRA)
what is the banks target range for the open market?
50 basis points
what is the Large value transfer system?
it allows financial institutions to transfer large amounts of cash to each-other. while being able to keep track of their daily surpluses and deficits so they can keep within their 50 point basis point operating target.
what is a draw-down?
the government deposits money from the chartered bank to the bank of canada. reducing funds available for banks to use. which reduces the amount of loans available.
what is a redeposit?
the government deposits money from the bank of canada and puts it into chartered banks. giving the chartered banks the ability give out more loans
what are 2 contexts of government policy?
- counter-cyclical business policy
2. development of human capital and tech advances
