Needs Complete typed solution with 100 % accuracy. For all the questions below select the appropriate answera) An open market purchase by the Bank of Canada would result in:O a fall in the excess reserves held by commercial banks.O a rise in the bank rate.O an increase in commercial bank reserves and an expansion of bank lending and deposits.a fall in the money supply as commercial banks reduced their loans and depositsb) When a central bank sets an inflation rate target as the primary goal of monetary policyO it must also set a fixed exchange rate target that is independent of its inflation targetO it must also set a money supply target that is independent of its inflation target.O it must also accept the money supply, exchange and interest rate consistent with its inflation targetO it must accept and support the government budget target set by the Minister of Finance.c) The Bank of Canada would use an SPRA when:O a temporary excess supply of monetary base puts downward pressure on the overnight interest ratea temporary shortage of monetary base puts upward pressure on the overnight interest rateO it wants to raise the ovemight interest rate and the bank rate.it wants to provide a long term increase in the monetary based) if a central bank conducts monatary policy by setting a target for the money supply, or the money supply growth rate, as the Bank of Canada did in the late 1970'sO it must then set the interest rate as required for equilibrium real GDP equal to potential GDPO it must then accept the interest rate, exchange rate and inflation rate required by its money supply target.O it must then set the exchange rate required for a zero inflation rateit must also set a target for the inflation rate that is independent of its money supply growth rate targete) When money is neutral in the long run but not in the short run it means that monetary policy:O cannot change shert run equilibrium output but can change potential output and long run inflation ratesO can change short run equilibrium cutput and long run inflation rates but not potential outputcan change short run equilibrium output to reduce output gaps and can also change potential output.O can change potential output but cannot change short run equilibrium output to reduce output gaps.

Open market purchases are defined as the buying of govt. securities (such as Treasury payments,…

a) An open market purchase by the Bank of Canada would result in: O a fall in the excess reserves held by commercial banks O a rise in the bank rate. an increase in commercial bank reserves and an expansion of bank lending and deposits. a fall in the money supply as commercial banks reduced their loans and deposits

a) An open market purchase by the Bank of Canada would result in: O a fall in the excess reserves held by commercial banks O a rise in the bank rate. an increase in commercial bank reserves and an expansion of bank lending and deposits. a fall in the money supply as commercial banks reduced their loans and deposits

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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