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Department
Administrative Studies
Course
ADMS 2400
Professor
Paul Favaro
Semester
Fall

Description
Economics Canada in the Global Environment 7e ParkinChapter 30 Monetary Policy301 Monetary Policy Objective and Framework1 Core inflation is the percentage change inA the Consumer Price Index including the eight most volatile pricesB an inflation rate that ranges between 1 percent and 3 percent annuallyC the Consumer Price Index excluding the eight most volatile pricesD the average of the 8 most volatile prices in the Consumer Price IndexE the target midpoint inflation rate of 2 percent per yearAnswerCDiff 1TopicMonetary Policy Objective and Framework2 How is responsibility for monetary policy set forth in CanadaA The Canadian Government administers monetary policy through the office of the Minister of FinanceB The Bank of Canada administers monetary policy as directed by the Minister of FinanceC The Bank of Canada Act places responsibility for the conduct of monetary policy on the Banks Governing CouncilD The Prime Minister bears ultimate responsibility for monetary policyE Both B and DAnswerCDiff 1TopicMonetary Policy Objective and Framework3 Which of the following benefits flow from the application of an inflationcontrol targetA If actual inflation exceeds the target range the Bank of Canada can induce a recession to correct the matterB The monetary authorities can change the target range whenever they feel it is appropriateC People can make decisions with an understanding that inflation rates will remain relatively lowD Financial market traders have a clearer understanding of the Bank of Canadas intentionsE Both C and DAnswerEDiff 1TopicMonetary Policy Objective and Framework1 2010 Pearson Education Canada4 Which of the following issues is a concern that critics express about the use of an inflationcontrol targetA The policy control rests in the hands of civil servants rather than in the hands of elected officialsB The policy control rests in the hands of elected officials rather than in the hands of civil servantsC It encourages a focus on real GDP growth at the expense of employment and of inflationD It encourages a focus on inflation at the expense of employment and real GDP growthE Monetary policy tends to be sensitive to the state of employment while focusing on inflation control targetsAnswerDDiff 1TopicMonetary Policy Objective and Framework5 Who are the members of the Bank of Canadas Governing CouncilA The Ministers of Finance from each province as well as the Federal Minister of FinanceB The Prime Minister the Minister of Finance and the Banks GovernorC The Minister of Finance the Governor and four Deputy GovernorsD The Banks Governor Senior Deputy Governor and four Deputy governors who are appointed by the Prime Minister to represent the public interestE The Banks Governor Senior Deputy Governor and four Deputy GovernorsAnswerEDiff 1TopicMonetary Policy Objective and Framework6 How is consultation between the Bank of Canada and the Government of Canada on monetary policy arranged A Consultations are arranged at the discretion of the Minister of FinanceB No consultation is required or neededC The Bank of Canada Act requires regular consultations between the Governor and the Minister of FinanceD Consultations are arranged at the discretion of the Governor of the Bank of CanadaE Consultations are arranged through the Parliamentary Committee on FinanceAnswerCDiff 1TopicMonetary Policy Objective and Framework2 2010 Pearson Education Canada7 Why does the Bank of Canada pay close attention to the core inflation rate in addition to the overall CPI inflation rateA The core rate is more volatile and therefore a better predictor of trend inflationB The core rate includes taxes while the overall CPI rate does notC The core rate has a lower average value and therefore makes the Bank look betterD The core rate is less volatile and a better predictor of future CPI inflationE The core rate excludes eight volatile prices and is therefore more likely to stay within the target bandAnswerDTopicMonetary Policy Objective and FrameworkSourceStudy Guide8 One criticism of the Bank of Canadas focus on an inflation control target is thatA if inflation falls below the target range a recession will resultB if inflation edges above the target range the Bank decreases aggregate demand and could create a recessionC the Bank pays too much attention to unemployment and real GDP growth and not enough to inflation controlD it makes setting expectations of inflation difficultE the Bank rarely achieves its targetAnswerBTopicMonetary Policy Objective and FrameworkSourceStudy Guide9 The objective of the Bank of Canadas monetary policy isA to keep the unemployment rate below 5 percent the inflation rate between 1 and 3 percent a year and longterm real GDP growth above 4 percent a yearB to control the quantity of money and interest rates to avoid inflation and when possible prevent excessive swings in real GDP growth and unemploymentC to keep the unemployment rate below 5 percent the inflation rate between 1 and 3 percent a year and longterm interest rates below 4 percent a yearD to keep the labour force participation rate above 80 percent the inflation rate below 2 percent a year and the exchange rate fluctuating by less than 3 percent a yearE to keep the overnight loans rate below 2 percent a year and the unemployment rate at its natural rateAnswerBTopicMonetary Policy Objective and FrameworkSourceMyEconLab3 2010 Pearson Education Canada
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