Chapter 14

Question 1

Current Monetary Policy

Answer 1

“Inflation-Control Targeting Policy”
-target of 2% agreed on by BoC & GoC
-started in ‘91
-problems say 1) unemployment rate rises or 2) Real GDP growth rate suffers

Question 2

Monetary Policy Controls (3)

Answer 2

-monetary base (control Q of money)
-exchange rate (CAD in foreign exchange market)
-short term exchange rate (OC of holding money) Chosen by the BoC~
only one can be set at a time as the other two would be the results

Question 3

Overnight Loans Rate

Answer 3

interest rate that BoC targets on overnight loans the big banks make to eachother

Question 4

Operating band

Answer 4

target overnight loans rate +/- 0.25%

Question 5

Settlement Balances Rate

Answer 5

Interest rate that chartered banks receive on their deposits at BoC (AKA CB reserves)

Question 6

Bank rate

Answer 6

interest rate that BoC charges big banks on loans

Question 7

Monetary Policy Transmission

Answer 7

change in OLR makes change in economy to make policy goal (inflation on target)