Textbook Notes (368,070)
Canada (161,617)
Economics (818)
ECON 1100 (224)
Chapter 10

Chapter 10

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ECON 1100
Eveline Adomait

Chapter 10: Stabilizing the Economy- The Role of the Central Bank The Bank of Canada: Canada’s Central Bank - The Bank of Canada’s key monetary policy objective is inflation control - Bank rises interest rates in response to higher inflation and cuts its interest rate in response to lower inflation Monetary Policy Objective: a central bank goal regarding a macroeconomic indicator that the bank influences Inflation-Control Target: refers either to the range of annual inflation rates within which the central bank aims to keep actual inflation or to the midpoint of the target range Core CPI: measure of the price level that excludes the most volatile components of the total CPI Total CPI Inflation: rate of change of the total CPI Core CPI Inflation: rate of change of the core CPI Monetary Policy Instrument: a tool/technique that a central bank uses to achieve a monetary policy objective The Modern Central Banking Theory of Interest Rate Determination Modern Central Banking Theory: the view that the central bank changes its key policy rate (official interest rate) directly, and commercial banks respond by changing market interest rates Official Interest Rate: a general term for the interest rate which the central bank controls to achieve its monetary policy objective; a term for the key policy objective of a central bank Prime Business Rate: the interest rate that commercial banks charge to their least risky business borrowers; also called prime rate Benchmark Rate: an interest rate upon which other interest rates are based Overnight Target Rate: the interest rate the Bank of Canada want to prevail in the financial market where major Canadian institutions borrow and lend funds to settle daily transactions with one another Large Value Transfer Sy
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