What Is the Policy Response by the Bank of Canada

question 59

Multiple Choice

What is the policy response by the Bank of Canada to an inflationary gap in one region of Canada (e.g.the West) when at the same time a recessionary gap exists in another region of Canada (e.g.Ontario) ?

• A)Each regional office of the Bank of Canada implements the appropriate monetary policy for that region.
• B)The Bank of Canada implements monetary policy in each region of Canada as required.
• C)There are automatic stabilizers inherent in monetary policy that allow the policy to adjust to close the output gap.
• D)The Bank of Canada consults with the commercial banks on the appropriate level of deposit creation for each region of the country.
• E)The Bank of Canada responds to the average level of inflation in the country and implements a single monetary policy.

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Definitions:

Capital Account Balance

A part of a country's balance of payments that records all transactions involving the purchase or sale of assets.

Current Account Balance

The current account balance is a country's trade balance plus net income and direct payments between it and other countries, indicating a nation's foreign trade and financial status.

Statistical Discrepancy

The difference between the sum of the components of GDP calculated on the income side and the expenditure side, due to measurement errors and data omissions.

International Reserves

International reserves are assets held by central banks in foreign currencies, gold, and special drawing rights, serving as a means to pay off international debt obligations or influence currency exchange rates.