Economics 1022A/B Chapter Notes - Chapter 30: Foreign Exchange Market, Monetarism, Money Multiplier
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ECON 1022A/B Full Course Notes
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Monetary policy is what banks and central government do to control in ation. Bank of canada and government agreed to keep in ation around 1% - 3% per year in ation rate targeting. A monetarist strategy where the bank sets a target in ation rate and explains how they will maintain that target. Since the last recession, bank has been sensitive with effects to employment when trying to achieve the target in ation rate conduct of monetary policy. Bank can control quantity of money, foreign exchange rates and short term interest rates. Banks can change the interest rate immediately (government takes longer- up to two years for a change in gdp when interest rate changes) Bank of canada changes the overnight rate. To change the interest rate, they target the overnight loans rate (interest rate in overnight loans that big banks make to each other) They control the overnight rate by adjusting reserves of the banks.