--%>
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 : Define Fiscal Impact Analysis Fiscal

    Fiscal Impact Analysis: Usually refers to a section of an analysis (example, bill analysis) which recognizes the costs and revenue impact of a proposal and, to the level possible, a particular numeric estimate for appropriate fiscal years.

    		•
  • Q : What is Revenue Revenue : Any adding up

    Revenue: Any adding up to cash or other current assets which does not raise any liability or reserve and does not symbolize the reduction or recovery of expenditure (example, reimbursements or abatements). Revenues are a kind of receipt usually derive

    		•
  • Q : Chartered banks Normal 0 false false

    Normal 0 false false

  • Q : Rate of inflation Normal 0 false false

    Normal 0 false false

    		•
  • Q : Define Trigger Trigger : An event which

    Trigger: An event which causes an action or actions. The triggers can be active (like pressing the update key to validate input to a database) or passive (like a tickler file to repeat of an activity). For illustration, budget "trigger" mechanisms hav

    		•
  • Q : Explain three career opportunities in

    List and explain the three career opportunities in the field of finance.Finance has three main career paths: financial management, financial markets and institutions, and investments. Financial managem

    		•
  • Q : What is the cost of equity Intermediate

    Intermediate Finance   Always leave 4 decimals in the ($) numbers in your calculations (e.g. PMT = $10.8924) and, particularly, 6 decimals for interest rates (e.g. r = 0.078643 or 7.8643%). QUESTION 1:?Conlins Manufactu

    		•
  • Q : Underwriting a new security issue for

    What does an investment banker do while underwriting a new security issue for any corporation? While underwriting a new security issue an investment banker purchase it and after that resells it to investors.

    		•
  • Q : Describe the financial leverage effect

    Describe the financial leverage effect and what causes it? Explain the potential benefits and negative consequences of high financial leverage? Financial leverage is the additional volatility of overall income caused through the presence of fix

    		•
  • Q : Explain Transfers Transfers : As

    Transfers: As employed in Schedule 10Rs and fund situation statements, transfers replicate the movement of resources from one fund to the other based on statutory authorization or particular legislative transfer appropriation authority.

    		•