1. Which of the following is FALSE in regards to an overnight target rate of 3.25%? a) The Bank of Canada will pay 3% interest on Chartered Banks' deposits with the Bank of Canada. b) The Bank of Canada will charge 3.5% on loans taken by the Chartered Banks from the Bank of Canada. c) The unemployment rate MUST be equal to the overnight target rate. Hence the unemployment rate is ALSO EQUAL to 3.5%.
PLEASE ANSWER ALL MULTIPLE CHOICE QUESTIONS (1-4)
1. Which of the following is FALSE in regards to an overnight target rate of 3.25%?
a) The Bank of Canada will pay 3% interest on Chartered Banks' deposits with the Bank of Canada.
b) The Bank of Canada will charge 3.5% on loans taken by the Chartered Banks from the Bank of Canada.
c) The
d) The overnight target rate is the interest rate that Chartered Banks will use when borrowing and lending money to each other.
e) There are NO FALSE statements. All solutions provided are correct.
2. If there is an expected increase in Canada's overnight rate, what should we expect to occur?
a) The Canadian dollar will be more valuable relative to other currencies. The Canadian dollar sees an increase in demand by foreigners seeking Canadian bonds and interest bearing investments.
b) Canadian exports will rise.
c) The stock market will grow. Investors will anticipate greater consumer borrowing of money to purchase items.
d) The prices for homes will grow as people are more likely to take out larger mortgages.
e) The Chartered Banks will loan out money at a lower interest rate.
3. What statement is true for Easy
a) Inflation will most likely fall in the future (after the policy is implemented).
b) The value for the total amount of loans take by consumers and businesses will increase in the future (after the policy is implemented).
c) It will shift the Aggregate Demand curve leftwards.
d) The unemployment rate will most likely rise in the future (after the policy is implemented).
e) There reserve ratio must be AT LEAST 10% for the Bank of Canada to consider easy monetary policy.
4. What holds true in regards to Government or Crown Corporations?
a) All of the provided statements are true in regards to Government or Crown Corporations.
b) They maintain affordable pricing. Government often cares about accessibility to the product instead of maximizing profit. These corporations are meant to address national interests instead of economic self-interests.
c) Some may earn profit (like Government-owned casino or LCBO). These profits are collected by the government through dividend payments.
d) Often they require the government to support their operations financially since they are not primarily concerned with maximizing economic profit.
e) The product or service is generally considered a high standard or high quality relative to the affordable price the consumer is charged.
Step by step
Solved in 3 steps
