Question

45. When the Bank of Canada buys bonds from a chartered bank, chartered bank reserves

A) decrease and chartered banks make additional loans.

B) increase and chartered banks reduce loans.

C) decrease and chartered banks reduce loans.

D) decrease and interest rates fall.

E) increase and chartered banks make additional loans.

46. If Canadian interest rates rise, the value of the Canadian dollar ________ and net exports ________.

A) appreciates; increase

B) appreciates; decrease

C) depreciates; increase

D) depreciates; decrease

E) appreciates only if U.S. interest rates also fall; decrease

47. Which government fiscal policy is a negative demand shock?

A) decreasing taxes

B) increasing transfer payments

C) increasing government spending

D) all of the above

E) none of the above

48. Which government fiscal policy is a positive supply shock?

A) increasing taxes

B) decreasing transfer payments

C) decreasing government spending

D) increasing government spending

E) none of the above

Answer 1

45.(E) . When Bank of Canada buys bonds, it pays for the bond thus, the reserves of chartered bank increase.

46.(B). If Canadian interest rate rises, then the demand for Canadian dollar rises thus appreciating its currency. Appreciation of the currency makes exports more expensive, thus exports decline.

47.(E). A negative demand shock is when due to adoption of fiscal policy the te demand in the economy reduces.

48.(D). Increase in government spending increases demand in the economy.