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1
Why does the Bank of Canada presently focus its monetary policy on maintaining the value of the Canadian dollar internally and externally?
A)Because it believes that a monetary rule approach to monetary policy is the best way to go
B)Because it believes that this approach will also achieve full employment
C)Because it believes that this approach will help achieve a balanced budget
D)Because it believes that interest rates must remain stable
E)Because it believes that the twin goals of stable prices and low unemployment are not compatible
2

Refer to Figure 9.12 to answer this question. If the money supply is equal to 180, what are the values of the interest rate and investment spending?
A)4 percent and 150
B)8 percent and 130
C)10 percent and 120
D)12 percent and 110
E)12 percent and 120
3

Refer to Figure 9.12 to answer this question. What is the effect of an increase in the money supply of 20?
A)Money demand increases by 20.
B)The quantity of money increases by 40.
C)The rate of interest increases by 2 percentage points.
D)Investment spending increases by 10.
E)Investment spending decreases by 20.
4

Refer to Figure 9.12 to answer this question. What is the effect of an increase in the supply of money from 160 to 200?
A)An increase of 4 percentage points in the interest rate
B)A decrease in the transactions demand for money
C)A decrease of 40 in investment spending
D)An increase of 40 in investment spending
E)An increase of 20 in investment spending





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