In a bid to get re-elected, politicians decide to decrease taxes when there is an inflationary gap. As a result, what action might the Bank of Canada decide to take?

Question 1 options:

increase the money supply

sell government securities to the chartered banks

buy government securities from the general public

reduce the overnight lending rate

Question 2(2 points)

What effect will expansionary monetary policy tend to have on the money supply and interest rates?

Question 2 options:

It will tend to decrease the money supply and increase interest rates.

It will tend to decrease the money supply and lower interest rates.

It will tend to increase the money supply and increase interest rates.

It will tend to increase the money supply and lower interest rates.

Question 3(2 points)

What would tend to be the effect of lowering the overnight lending rate, other things being equal?

Question 3 options:

It would increase the dollar volume of loans made by the banking system.

It would decrease aggregate demand.

It would increase SRAS.

d It would decrease the money supply.

Question 4(2 points)

Due to the time lag, when are the major effects of a change in monetary policy usually felt?

Question 4 options:

1-2 months

4-6 months

12 months

18-24 months

Question 5(2 points)

Which of the following would tend to increase AD?

Question 5 options:

an increase in the bank rate

a decrease in the money supply

a chartered bank using excess reserves to extend a loan to a customer

a chartered bank purchasing government bonds from the Bank of Canada as an investment

Question 6(2 points)

When the economy is experiencing an inflationary gap, how can monetary policy affect real output and the price level?

Question 6 options:

A contractionary monetary policy can result in increased real output and a lower price level.

A contractionary monetary policy can result in decreased real output and an increased price level.

A contractionary monetary policy can result in decreased real output and a lower price level.

A contractionary monetary policy can result in increased real output and an increased price level.