Final

Question 1

What is Interest Rates and Monetary Policy

Answer 1

Change in money supply by our central bank to remove recessionary and Inflationary gaps

Question 2

What is Equilibrium in money mkt

Answer 2

Intersection of money supply and demand schedule will determine point of equilibrium in money mkt

Question 3

What are the two types of Demand for money

Answer 3

Transactive and Precautionary Demand for money (Dt)
Asset demand for money (Da)

Question 4

What is the main determinant of Dt

Answer 4

Level of Income

Question 5

Dt is independent of what

Answer 5

Rate of interest

Question 6

Supply of money is determined by what

Answer 6

Our central bank independent of the rate of interest

Question 7

What is Monetary Policy

Answer 7

A change in Ms by Bank of Canada to remove recessionary and inflationary gaps

Question 8

Bank of Canada is what

Answer 8

A public institution
Central Bank

Question 9

What are some functions of Bank of Canada

Answer 9

Banker to chartered banks
Each charter bank has a deposit account with BoC and can borrow from BoC
Banker of Federal Gov

Question 10

What are loans that charter banks take out called

Answer 10

Advances and the interest rate they pay is called the bank rate

Question 11

^ in Ms by Bank of Canada removes what

Answer 11

Inflationary and Recessionary gaps

Question 12

What are some Monetary tools

Answer 12

Open MKT operation
Change in overnight loan rate and bank rate
Switching Gov deposits

Question 13

What happens with a Open MKT Operation

Answer 13

Recession: B of C will buy Gov bonds from chartered banks and public
Inflation: B of C will sell Gov bonds to chartered banks and public

Question 14

What is the overnight loan rate

Answer 14

Rate of interest that charter banks charge each other when borrowing

Question 15

If charter banks are in trouble what can they do?

Answer 15

They can borrow money from BoC

Question 16

Bank rate is how much higher than overnight rate

Answer 16

Quarter % higher

Question 17

If there is a Recession what happens to the overnight loan rate

Answer 17

Reduces

Question 18

If there is a Inflation what happens to the overnight loan rate

Answer 18

Increases

Question 19

What is international trade

Answer 19

Export and Import of goods and services and capital across international boundaries

Question 20

What is Terms of trade

Answer 20

Rate of which export and imports happen

Question 21

What are the two types of Tariffs

Answer 21

Revenue Tariff
Protective Tariff

Question 22

What is a Tariff

Answer 22

Taxes that are imposed on products that are not produced domestically

Question 23

What is VER

Answer 23

Voluntary
Export
Restriction
Restricting exhibit in order to avoid heavy tax

Question 24

What is Quality Control

Answer 24

Country impairs tough regulations on imports to keep prices up

Question 25

If a country holds a tariff on a product from another country what can you expect

Answer 25

Retaliation

Question 26

What is the Balance of Payments

Answer 26

Record of transactions of the residents of one country and the rest of world

Question 27

If credit > debit then what?

Answer 27

Surplus in current account

Question 28

If debit > credit then what?

Answer 28

Deficit in current account

Question 29

If credit = debit then what?

Answer 29

Balance in current account

Question 30

What are the parts of Current account

Answer 30

X and M of Goods X and M of Services Net Investments Income Net Transfers

Question 31

What is short term capital

Answer 31

Motive for short term capital movement is the (r) differential between countries

Question 32

What is long term capital

Answer 32

Claims with maturity of more than ! year as well as buying and selling shares

Question 33

What is Special Drawing Right

Answer 33

Central bank of each country has to aid any deficit

Question 34

What does Special Drawing Right have with each central bank that has a International Monetary Fund

Answer 34

Line of Credit