Questions and Answers
The Bank of Canada's largest asset is Bank notes in circulation.
True
The Prime Minister of Canada has sole responsibility for conducting monetary policy.
False
The expenditure which is independent of income and real GDP is referred to as induced expenditure.
False
The attempt to control inflation and moderate the business cycle by changing the quantity of money in circulation and adjusting interest rates is called monetary policy.
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Investment, government and export expenditure are deemed to be autonomous expenditures.
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When Canadian firms increase exports, it results in a current account surplus and a capital account deficit.
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The single largest source of Canadian federal government revenues is personal income taxes.
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The Bank of Canada lends money directly to the general public.
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Canada's currency is currently backed by gold.
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Adoption of credit and debit cards decreases the demand for money.
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The Bank of Canada's operating band includes the prime rate, overnight rate, and settlement balances rate.
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The overnight loans rate is higher than the bank rate.
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For barter to be successful, there must be a double coincidence of wants.
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Most deposits in M1 and M2 are deposits of chartered banks.
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The Bank of Canada lends money to the general public.
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The Bank of Canada Act places responsibility for the conduct of monetary policy on the Federal Finance Minister.
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Study Notes
Bitcoin and Currency
- Bitcoin is not considered legal tender in Canada; it operates as a digital asset.
- Canada's currency is a fiat currency system, meaning it is not backed by gold or any physical commodity.
Demand for Money
- Interest rates and financial innovation influence the quantity of money people plan to hold.
- The adoption of credit and debit cards reduces the demand for physical cash.
Bank of Canada Operations
- The overnight loans rate is lower than the bank rate, which influences short-term interest rates.
- The Bank of Canada does not lend money directly to the general public but operates through financial institutions.
Monetary Policy
- Successful inflation-control targets help the financial market understand monetary policy, aiding savers and investors.
- The Bank of Canada's goal is to maintain a 2% inflation rate within a 1% to 3% range through monetary policy, not fiscal policy.
Aggregate Expenditure Model
- Autonomous expenditure is defined as expenditure that is independent of income and real GDP.
- Induced expenditure refers to expenditures that change as income and real GDP fluctuate.
Current and Capital Accounts
- An increase in Canadian exports to Germany results in a surplus in the current account and a deficit in the capital account, as foreign entities borrow to fund imports.
Federal Budget and Revenue
- The Canadian federal budget is presented to Parliament by the Prime Minister.
- Corporate income taxes are the largest source of revenue for the Canadian federal government.
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Description
This quiz covers key topics related to monetary policy in Canada, including the role of Bitcoin as a digital asset, the functioning of the Bank of Canada, and the factors influencing demand for money. Test your understanding of how financial institutions and monetary policy affect the economy.
