1)When the Bank of Canada sells a Canadian government bond, what are the effects on the volume of loans issued by the banking system and on investment?

a. The volume of loans issued by the banking system increases, and investment tends to increase

.b. The volume of loans issued by the banking system increases, and investment tends to decrease

.c. The volume of loans issued by the banking system decreases, and investment tends to increase

.d. The volume of loans issued by the banking system decreases, and investment tends to decrease.

2)What action might the Bank of Canada take if it aims to reduce the money supply to slow inflation?

a. It might decrease its target for the overnight interest rate.

b. It might buy government bonds on the open market.

c. It might raise its target for the overnight interest rate.

d. It might lend money to chartered banks.

3)When the Bank of Canada wants to induce monetary expansion, it can provide banks with excess reserves, but it CANNOT force the banks to make loans, thereby creating new money.

a. True

b. False

4)Consider a movement along the SRAS curve that results in high prices and higher real GDP. This movement is equivalent to moving along a short-run Phillips curve in which there is,

a. an increase in inflation and employment.

b. a fall in inflation and an increase in unemployment.

c. a fall in inflation and unemployment

.d. an increase in unemployment and a rise in the price index.

5)The slope of the Phillips curve is drawn in such a way that it assumes that once the economy has relatively low unemployment rates, further reductions in the unemployment rate can occur only if the economy can accept larger increases in the inflation rate.

a. True

b. False