Question

In: Economics

Which of the following is a FALSE statement regarding the Bank of Canada and monetary​ policy?...

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.

Solutions

Expert Solution

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 of​Canada’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 of​Canada’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 overnight​loan’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 the​Bank’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.


Related Solutions

Suppose the Bank of Canada releases a policy statement today which leads people to believe that...
Suppose the Bank of Canada releases a policy statement today which leads people to believe that the Bank will be enacting expansionary monetary policy in the near future. Everything else held constant, the release of this statement would immediately cause the demand for Canadian assets to ________ and the Canadian dollar to ________. A) increase; appreciate B) decrease; appreciate C) increase; depreciate D) decrease; depreciate
According to the Bank of Jamaica in a statement on its monetary policy, “Under the Bank...
According to the Bank of Jamaica in a statement on its monetary policy, “Under the Bank of Jamaica Act (1960), the conduct of monetary policy is aimed at regulating the growth of money and credit in line with the resources expected to finance economic activity and generate employment, without undermining the conditions of price stability”. The recent COVID19 situation has resulted in many persons being unable to work and has led to a decrease in economic activity in Jamaica. a....
Consider the money market. In conducting monetary policy the Bank of Canada arranges the purchase and...
Consider the money market. In conducting monetary policy the Bank of Canada arranges the purchase and sale of Government of Canada securities with the chartered banks. Show changes (with a + or – sign) to the assets and liabilities of the Bank of Canada and the Chartered Banks if the Bank of Canada sells $50 million in securities to the chartered banks. Bank of Canada Assets Liabilities and Net Worth Chartered Banks Assets Liabilities and Net Worth Briefly explain in...
Briefly explain whether the following statement is true or false. In the AD-AS model, monetary policy...
Briefly explain whether the following statement is true or false. In the AD-AS model, monetary policy cannot stabilize both the price level and the level of real GDP following a shock to aggregate supply. Please answer elaborately with proper reasoning, graphs and equations. Also include a policy example.
Which of the following is a FALSE​ statement? A. General Motors of Canada permanently closing down...
Which of the following is a FALSE​ statement? A. General Motors of Canada permanently closing down its Oshawa car plant effective December​ 19, 2019, will decrease aggregate expenditure. B. The Canadian federal​ government's March​ 18, 2020 fiscal stimulus announcement of 82 billion dollars in response to the​ COVID-19 crisis​ will, ceteris​ paribus, increase aggregate expenditure. C. The Canadian federal​ government's March​ 18, 2020 fiscal stimulus announcement of 82 billion dollars in response to the​ COVID-19 is an example of an...
Which of the following is a limitation of monetary policy: 1. The central bank cold lose...
Which of the following is a limitation of monetary policy: 1. The central bank cold lose control over domestic money supply and interest rates, which can become more volatile   2. The foreign currency can come under speculative attacks and lose significant value, which can eventually lead to a full-blown crisis. 3. The central bank could maintain too much control over domestic money supply and interest rates, which can become more volatile exchange rate targeting.
In which of the following situations would the Reserve Bank of Australia conduct contractionary monetary policy?...
In which of the following situations would the Reserve Bank of Australia conduct contractionary monetary policy? A.The RBA fears that unemployment is climbing above the natural rate of unemployment. B.The RBA is worried that deflation will become a problem. C.The RBA is concerned that the natural unemployment rate is trending downward. D.The RBA is concerned that the growth in aggregate demand would continue to exceed the growth in potential GDP. E.The RBA believes that aggregate demand is growing too slowly...
List 3 tools of Bank of Canada for monetary control. Explain how Bank of Canada uses...
List 3 tools of Bank of Canada for monetary control. Explain how Bank of Canada uses the open market operations under regular circumstances and when does it use quantitative easing. How quantitative easing is different from the Bank’s regular open market operation.
Which of the following is NOT an example of monetary policy?
Which of the following is NOT an example of monetary policy? a. The Federal Reserve reduces the reserve requirements. b. The Federal Open Market Committee decides to sell bonds. c. The Federal Reserve facilitates bank transactions by clearing checks. d. The Federal Open Market Committee decides to buy bonds.
Which of the following best describes the difference between monetary policy and fiscal policy? Monetary policy...
Which of the following best describes the difference between monetary policy and fiscal policy? Monetary policy is quicker to implement but has a longer effect lag than fiscal policy. Monetary policy is slower to implement but has a longer effect lag than fiscal policy. Monetary policy is quicker to implement but has a shorter effect lag than fiscal policy. Monetary policy is slower to implement but has a shorter effect lag than fiscal policy.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT