--%>
Assignment Help - homework help

Modify-open market operations-switching government deposits

Assume that you are the governor of the Bank of Canada. The economy is experiencing sharp and prolonged inflationary trend.  What modify in (a) open market operations, and (b) switching government deposits would you assume? Describe in each of the case how the change you advocate would influence chartered bank cash reserves and affect the money supply.

E

Expert

Verified

To decrease inflation, the Bank of Canada would increase interest rates.  It would be accomplished typically through open-market operations (selling bonds), however could also be obtained by switching government deposits from the chartered banks to the Bank of Canada. In both of the cases it would decrease chartered bank cash reserves.

The restrictive monetary policy would decrease the lending ability of the banking system, enhance the real interest rate, decrease investment spending, decrease aggregate demand, and decrease inflation.

 

   Related Questions in Finance Basics

  • Q : What is Reference Code Reference Code :

    Reference Code: A three-digit code recognizing whether the item is from the Budget Act or some other source (example, legislation), and its character (example, state operations). This is the middle segment of the budget item or appropriation number.

    		•
  • Q : Difference in annuities due or ordinary

    Normal 0 false false

    		•
  • Q : Define the term Judgments Judgments :

    Judgments: It is generally refers to decisions made by courts against the state. The payment of judgments is subject to a range of controls and procedures.

    		•
  • Q : What are Exempts Exempts : The state

    Exempts: The state employees exempt from civil service pursuant to the subdivision (e), (f), or (g) of Section 4 of Article VII of the California Constitution. Illustrations comprise department directors and some other gubernatorial appointees.

    		•
  • Q : What is Abolishment of Fund Abolishment

    Abolishment of Fund: It is a closure of fund pursuant to the operation of law. The funds might also be administratively eliminated by the Department of Finance with the concurrence of the State Controller’s Office. Whenever a sp

    		•
  • Q : How is finance associated to accounting

    How is finance associated to the disciplines of accounting and economics? Financial management is basically a combination of accounting and economics. Firstly, financial managers employ accounting information such

    		•
  • Q : Define Settlements Settlements : It

    Settlements: It refers to any proposed or final settlement of the legal claim (generally a suit) against the state. Approval of payments and settlements for settlements are subject to several controls.

    		•
  • Q : What is Feasibility Study Report

    Feasibility Study Report (FSR): This is a document proposing an information technology project which contains analyses of options, cost estimates, and some other information.

    		•
  • Q : What is Administration Administration :

    Administration: It refers to the Governor's Office and those individuals, subdivisions, and offices reporting to it (example, the Department of Finance).

    		•
  • Q : What is Expenditure Authority

    Expenditure Authority: The authorization to make expenditure (generally by a budget act appropriation, provisional language or some other legislation).

    		•