Lecture 16 Flashcards
Most central banks accept that, in the long run, monetary policy has an effect on
Question 1 options:
A)
the price level and the inflation rate only.
B)
all real economic variables.
C)
the level of investment demand.
D)
real GDP and the price level.
E)
the level of aggregate demand.
A
The interest rate that the Bank of Canada charges commercial banks for loans is called the
Question 5 options:
A)
prime rate.
B)
overnight interest rate.
C)
preferred lending rate.
D)
bank rate.
E)
term interest rate.
D
If the Bank of Canada were required to gain approval for all changes in monetary policy from Parliament before implementing them, this would result in
Question 6 options:
A)
permanently higher exchange rates for the Canadian dollar.
B)
temporary reductions in the interest rate.
C)
permanently higher unemployment.
D)
longer time lags in monetary policy.
E)
higher inflation in the long run.
D
During a period of renewed inflation fears in 1988, the governor of the Bank of Canada, Mr. John Crow, announced that monetary policy would henceforth be guided more by
Question 7 options:
A)
unemployment levels and the level of prices.
B)
exchange rate targets since depreciation of the Canadian dollar tends to be inflationary.
C)
the goal of long-term “price stability.”
D)
real GDP growth.
E)
the level of real income growth and “price stability.”
C
Inflation targeting
Question 12 options:
A)
is a destabilizing policy because it requires the Bank of Canada to engage in inappropriate policy responses.
B)
is irrelevant to the stability of the economy because of the long-run neutrality of money.
C)
creates output gaps that must be then offset with fiscal policy stabilizers.
D)
should be replaced with fiscal policy targeting because of the long-run neutrality of money.
E)
is a stabilizing policy because the Bank of Canada’s policy adjustments act to stabilize real GDP growth.
E
