Question

In: Economics

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.

Solutions

Expert Solution

Following are 3 tools -

1. Open market operation - when central bank buys and sells securities and tressury bills.

2. Reserve requirements - reserve banks hs to maintain either with themselves or with central bank . Bank of Canada fixes the value of there reserve . Higher value means Contractionary monentary policy and lower values of reserve means expansionary policy

3. Discount rate - rate at which central bank gives loans to commercial banks . High rate means Contractionary measure and vice versa

Now under regult circumstances -

1 expansionary policy - In order to increase growth and investment, bank of Canada purchases security to inguse liquidity with private banks which will increase money supply

2 Contractionary policy - In order to control inflation, central banks buys servurities from private banks to soak liquidity so tht money supply can be reduced

Quantitative easing is a measure under open market operation which is used under more grave situations to get growth and investment quickly  

In this central bank purchases longer term securities to induce money supply in the economy and encourage growth and investment.

Bank of Canada has started using this in covid 19 times to ensure tht , supply of money increased through this policy may lowers interest rate of money at lower positions even to zero. lfor example now in covid-19 situation Canada central bank uses this quantitative easing in open market to induce liquidity They do this with printing new money so that they can purchase govt securities .


Related Solutions

Explain (3) conventional monetary policy tools used by the Central bank of a country to control...
Explain (3) conventional monetary policy tools used by the Central bank of a country to control the money supply and interest rates in the financial markets? (400) words
What are the tools of monetary control used by central banks, such as the Bank of...
What are the tools of monetary control used by central banks, such as the Bank of England, the European Central Bank? Why cannot central banks fully control the money supply If the central bank wants to increase the money supply with outright open-market operations, what does it do? pleae qicly
Explain what is meant by monetary policy. List and explain the 3 tools the Federal Reserve...
Explain what is meant by monetary policy. List and explain the 3 tools the Federal Reserve has to conduct monetary policy. What is your opinion which is more effective fiscal or monetary policy? Explain why you feel the way you do.
A. Explain in detail the 3 primary tools of Monetary Policy the Federal Reserve uses to...
A. Explain in detail the 3 primary tools of Monetary Policy the Federal Reserve uses to change the money supply and interest rates in the economy. B. Which tool is the most important? Explain why.
A. Explain in detail the 3 primary tools of Monetary Policy the Federal Reserve uses to...
A. Explain in detail the 3 primary tools of Monetary Policy the Federal Reserve uses to change the money supply and interest rates in the economy. B. Which tool is the most important? Explain why.
Introduction: You have learned that the Federal Reserve Bank uses 3 main tools to conduct monetary...
Introduction: You have learned that the Federal Reserve Bank uses 3 main tools to conduct monetary policy in times of crisis. It can change the interest rate, it can change the reserve requirement, and it can change the discount rate. Additionally, the Fed can use emergency tools, such as quantitative easing. In this discussion, participants will find articles on the Federal Reserve Bank's response to the COVID-19 crisis, then discuss the pros/cons of this response from an economic perspective. Post:...
Explain in detail the 3 primary tools of Monetary Policy the Federal Reserve uses to change...
Explain in detail the 3 primary tools of Monetary Policy the Federal Reserve uses to change the money supply and interest rates in the economy.
Explain the 4 Tools of Monetary Policy and how the Central Bank impacts the overall economy....
Explain the 4 Tools of Monetary Policy and how the Central Bank impacts the overall economy. Make sure to include a graph of how changes in the money supply impact interest rates
Explain the 4 Tools of Monetary Policy and how the Central Bank impacts the overall economy....
Explain the 4 Tools of Monetary Policy and how the Central Bank impacts the overall economy. Make sure to include a graph of how changes in the money supply impact interest rates
Explain the four tools of monetary policy and how the central bank impacts the overall economy....
Explain the four tools of monetary policy and how the central bank impacts the overall economy. Make sure to include a graph of how changes in the money supply impact interest rates?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT