Final Flashcards
What is Interest Rates and Monetary Policy
Change in money supply by our central bank to remove recessionary and Inflationary gaps
What is Equilibrium in money mkt
Intersection of money supply and demand schedule will determine point of equilibrium in money mkt
What are the two types of Demand for money
Transactive and Precautionary Demand for money (Dt)
Asset demand for money (Da)
What is the main determinant of Dt
Level of Income
Dt is independent of what
Rate of interest
Supply of money is determined by what
Our central bank independent of the rate of interest
What is Monetary Policy
A change in Ms by Bank of Canada to remove recessionary and inflationary gaps
Bank of Canada is what
A public institution
Central Bank
What are some functions of Bank of Canada
Banker to chartered banks
Each charter bank has a deposit account with BoC and can borrow from BoC
Banker of Federal Gov
What are loans that charter banks take out called
Advances and the interest rate they pay is called the bank rate
^ in Ms by Bank of Canada removes what
Inflationary and Recessionary gaps
What are some Monetary tools
Open MKT operation
Change in overnight loan rate and bank rate
Switching Gov deposits
What happens with a Open MKT Operation
Recession: B of C will buy Gov bonds from chartered banks and public
Inflation: B of C will sell Gov bonds to chartered banks and public
What is the overnight loan rate
Rate of interest that charter banks charge each other when borrowing
If charter banks are in trouble what can they do?
They can borrow money from BoC
Bank rate is how much higher than overnight rate
Quarter % higher
If there is a Recession what happens to the overnight loan rate
Reduces
If there is a Inflation what happens to the overnight loan rate
Increases
What is international trade
Export and Import of goods and services and capital across international boundaries
What is Terms of trade
Rate of which export and imports happen
What are the two types of Tariffs
Revenue Tariff
Protective Tariff
What is a Tariff
Taxes that are imposed on products that are not produced domestically
What is VER
Voluntary
Export
Restriction
Restricting exhibit in order to avoid heavy tax
What is Quality Control
Country impairs tough regulations on imports to keep prices up
If a country holds a tariff on a product from another country what can you expect
Retaliation
What is the Balance of Payments
Record of transactions of the residents of one country and the rest of world
If credit > debit then what?
Surplus in current account
If debit > credit then what?
Deficit in current account
If credit = debit then what?
Balance in current account
What are the parts of Current account
X and M of Goods
X and M of Services
Net Investments Income
Net Transfers
What is short term capital
Motive for short term capital movement is the (r) differential between countries
What is long term capital
Claims with maturity of more than ! year as well as buying and selling shares
What is Special Drawing Right
Central bank of each country has to aid any deficit
What does Special Drawing Right have with each central bank that has a International Monetary Fund
Line of Credit
