1. What is the basic objective of monetary policy? What are the major strengths of monetary policy? Why is monetary policy easier to conduct than fiscal policy?
2. Suppose you are the governor of the Bank of Canada. The economy is experiencing a sharp rise in the inflation rate. What changes in (a) open-market operations and (b) the bank rate would you consider? Explain in each case how the change you advocate would affect chartered bank cash reserves and influence the money supply.
3. Why might one person work more, earn more, and pay more income tax when his or her tax rate is cut, while another person might work less, earn less, and pay less income tax in the same circumstance?