If the central bank targets money supply, an increase in money demand will:

Question 1 options:

a)	decrease the interest rate because the money supply is fixed.

b)	None of the answers are correct

c)	reduce the nominal interest rate because money supply will rise more than the change in demand.

d)	increase the interest rate as money supply adjusts.

e)	increase the money supply.

When there is an adverse supply shock in the economy, the Bank of Canada faces a trade-off between ____ and ____.

Question 3 options:

a)	reducing inflation; keeping employment up

b)	stabilizing output; keeping inflation low

c)	stimulating employment; stimulating output

d)	stabilizing prices; stimulating output

e)	None of the answers are correct

When middle-income countries change the value of an exchange rate by working together, they engages in

Question 4 options:

a)	None of the answers are correct

b)	an interestrate adjustment.

c)	a currency union.

d)	capital controls.

e)	policy coordination.

Suppose oil prices jump up and the central bank is completely accommodative. How must the central bank adjust the nominal interest rate? How must it adjust the money supply?

Question 6 options:

a)	None of the answers are correct

b)	The central bank will decrease the nominal interest rate by increasing the money supply.

c)	The central bank will keep the nominal interest rate constant by leaving the money supply unchanged.

d)	The central bank will increase the nominal interest rate by reducing the money supply.

Assume the Bank of Canada wants to decrease the money supply by $200. Should it buy or sell government bonds? How much should it buy or sell?

Question 8 options:

a)	None of the answers are correct

b)	The Bank of Canada needs to buy government bonds in the amount of $200.

c)	The Bank of Canada needs to buy government bonds in the amount of $200/m where m is the money multiplier.

d)	The Bank of Canada needs to sell government bonds in the amount of $200.

e)	The Bank of Canada needs to sell government bonds in the amount of $200/m where m is the money multiplier.