Question
In: Economics
15. If the central bank keeps the overnight rate unchanged, a drop in financial confidence will...
15. If the central bank keeps the overnight rate unchanged, a drop in financial confidence will lead to…
(a) Lower investment and net exports.
(b) Unchanged investment and net exports.
(c) Lower investment and unchanged net exports.
(d) Unchanged investment and lower net exports.
15. Choice:
Explanation:
16. Comparing the size of the monetary base and the money supply...
(a) The two are equal because the banks prudently keep reserves equal to deposits.
(b) The monetary base is typically bigger because it includes treasury bills.
(c) The money supply is bigger because banks make loans.
(d) The money supply is bigger because it includes treasury bills.
Solutions
Rahul Sunny answered 8 months agoRelated Solutions
1..Expansionary fiscal policy ............... equilibrium output and ...................... the interest rate if the Central Bank keeps...
1..Expansionary fiscal policy ............... equilibrium output
and ...................... the interest rate if the Central Bank
keeps the money supply constant.
Select one:
a. raises----raises
b. raises---falls
c. falls---raises
d. falls---falls
2.The less interest-sensitive money demand is, the more
effective monetary policy is relative to fiscal policy.
Select one:
True?
False?
3.Which of the following is not cause the LM curve to shift
right?
Select one:
a. fall in the money demand
b. all of the above
c. fall in the...
Suppose the Indian central bank (RBI) increases its target overnight interest rate. In doing so it...
Suppose the Indian central bank (RBI) increases its target
overnight interest rate. In doing so it is clearly trying to
increase interest rates in the money market (and throughout the
economy).
(c) Suppose we could treat the Indian economy as a closed one.
What effect will the results of the policy have on investment, on
aggregate expenditure? Include diagrams in your answer.
(d) Although not as open to capital flows as Canada, we can
think of India is an open...
A6-10. Suppose the Indian central bank (RBI) increases its target overnight interest rate. In doing so...
A6-10. Suppose the Indian central bank (RBI) increases its
target overnight interest rate. In doing so it is clearly trying to
increase interest rates in the money market (and throughout the
economy).
(d) Although not as open to capital flows as Canada, we can
think of India is an open economy. What additional effect will the
policy have on aggregate expenditure? [4]
(e) How will aggregate demand be affected, whether we treat the
economy as closed or open? [2]
A6-10. Suppose the Indian central bank (RBI) increases its target overnight interest rate. In doing so...
A6-10. Suppose the Indian central bank (RBI) increases its
target overnight interest rate. In doing so it is clearly trying to
increase interest rates in the money market (and throughout the
economy).
(b) The central bank can change the money supply through an open
market operation. In this case, should it buy bonds from, or sell
bonds to, the banking system? Briefly describe how this changes the
amount of deposit money in the system. If the necessary change in
the...
The rate that Bank One borrows a Fed Fund rate from Bank Two for overnight reserves...
The rate that Bank One borrows a Fed Fund rate from Bank Two for
overnight reserves is also called ___.
A. A repo rate
B. A reverse repo rate
C. Brokers’ call money rate
D. A banker’s acceptance rate
Suppose the overnight market rate is below the target rate set by the Bank of Canada...
Suppose the overnight market rate is below the target rate set
by the Bank of Canada (BoC). To reduce the downward pressure on
overnight rate, the Bank of Canada decides to use open market
operations with a target volume of 100 million dollars.
(a) Describe the actions BoC can undertake to intervene in the
overnight market.
(b) Using T-accounts, record the changes in balance sheets of
BoC and the financial system following BoC’s intervention.
1 When the Bank of Canada lowers the overnight rate, the Canadian interest rate differential ________...
1 When the Bank of Canada lowers the overnight rate, the
Canadian interest rate differential ________ and the Canadian
dollar ________ on the foreign exchange market.
A) increases; appreciates
B) increases; depreciates
C) decreases; appreciates
D) decreases; depreciates
E) decreases; reaches interest rate parity
2. When real GDP is less than potential GDP, an increase in the
quantity of money leads to a(n)
A) increase in both real GDP and the price level.
B) decrease in real GDP and an...
1.When the Bank of Canada increases the overnight rate, it: a.increases the reserve to deposit ratio...
1.When the Bank of Canada increases the overnight rate, it:
a.increases the reserve to deposit ratio (rr).
b.is likely to decrease the monetary base (B).
c.decreases the reserve to deposit ratio (rr).
d.is likely to increase the monetary base (B).
2.The concept of monetary neutrality in the classical model
means that an increase in the money supply growth rate will
increase:
a.real interest rates.
b.real GDP.
c.both saving and investment by the same amount.
d.nominal interest rates.
You heard in the news that Bank of Canada has just lowered the policy overnight rate...
You heard in the news that Bank of Canada has just lowered the
policy overnight rate to 0.25% due to the economic catastrophy of
Corornavirus.
Does this signal the Bank is moving to to more expansionary or
contractionary monetary policy? Explain in detail.
In your opinion why did the bank lowered the policy overnight
rate?
The current overnight loans rate is 3 percent, with the Bank of Canada's operating band set...
The current overnight loans rate is 3 percent, with the Bank of
Canada's operating band set at 2.75 to 3.25 percent. If the Bank of
Canada lowers their operating band to 2.25 to 2.75 percent, which
of the following is one of the reasons the overnight rate will fall
to within this new range?
Question 44 options:
A) Since the banking system can now borrow from the Bank of
Canada at 2.75 percent, no bank would borrow on the overnight...
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