In: Economics
Which of the following is a FALSE statement regarding the Bank of Canada and monetary policy?
A.
The overnight loans rate and the Treasury bill rate move closely together.
B.
When the Bank of Canada sells securities, the interest rate rises and the Bank of Canada's assets and liabilities both decrease.
C.
The Bank of Canada's operating band is the target overnight rate plus or minus 0.25 percentage points.
D.
The Bank rate is always lower than the overnight loan's rate.
E.
The Bank of Canada Act places responsibility for the conduct of monetary policy on the Bank's Governing Council.
Statement A: The overnight loans rate and the Treasury bill rate move closely together are true.
Statement B is true that is when the Bank of Canada sells securities, the interest rate rises and the Bank ofCanada’s assets and liabilities both decrease. Assets and liabilities increase when Bank of Canada buys securities and reserve also gets increased.
Statement C: The Bank ofCanada’s operating band is the target overnight rate plus or minus 0.25 percentage points is also true. Operating band is 0.5 % points wide. By setting Bank rate and settlement balances rate, operating bands are created.
Statement D: The Bank rate is always lower than the overnightloan’s rate is false because the Bank Rate is still at the top. Interest rate paid by the largest banks to borrow money on a single-day basis is called the overnight rate.
Statement E: The Bank of Canada Act places responsibility for the conduct of monetary policy on theBank’s Governing Council is true. Government of Canada and Bank of Canada jointly agree on monetary policy but act places responsibility for the conduct of monetary policy on the Bank’s Governing Council.
Statement D is only False.