Final Exam

Question 1

Overnight Rate

Answer 1

the interest rate on overnight (one-day) securities; used by the BOC as the primary instrument of monetary policy

Question 2

Direct Clearers

Answer 2

members of the Canadian Payments Association who participate directly in the Automated clearing Settlement System (ACSS) and maintain a settlement account at the BOC

Question 3

Policy Rate

Answer 3

the target for the Bank of Canada’s overnight interest rate

Question 4

Operating Band

Answer 4

The BOC’s operational objective is to keep the overnight rate iwthin an operating band of 50 basis points

Question 5

Bank Rate

Answer 5

the bank rate is the interest rate the BOC charges LVTS participants that require an overdraft loan (advance) to cover negative settlement balances on the books of the Bank at the end of the banking day

Question 6

Monetary Conditions

Answer 6

determined by the level of short-term interest rates and the exchange rate of the Canadian dollar