Which of the following statements is correct regarding an interest rate above equilibrium?

Question 16 options:

a)	It will result in a shortage of money in the money market.

b)	It is a result of people demanding too much money.

c)	It is the normal state of affairs.

d)	It will result in a surplus of money in the money market.

Question 17 (1 point)

In Canada, who controls the supply of money?

Question 17 options:

a)	The Department of Finance.

b)	The market.

c)	Canadian Chartered Banks.

d)	The Bank of Canada.

Question 18 (1 point)

How is the Bank of Canada able to affect the supply of money?

Question 18 options:

a)	By influencing the level of bank reserves.

b)	By using fiscal policy effectively.

c)	By emphasizing importance of financial literacy for Canadian.

d)	By controlling the number of banks allowed to carry on business.

Question 19 (1 point)

What is government spending on goods and services in excess of net tax revenue called?

Question 19 options:

a)	A budget deficit.

b)	Monetizing the debt.

c)	Pro-cyclical fiscal policy.

d)	A budget surplus.

Question 20 (1 point)

What is the effect of an increase in the money supply?

Question 20 options:

a)	It will increase the interest rate.

b)	It will decrease the demand for money.

c)	It will decrease the quantity of investment spending.

d)	It will lower the interest rate.

Answer from your tutor:

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JusticeComputerEel21Answered1 hour ago

16. D. It will result in a surplus of money in the money market.

17. D. The Bank of Canada.

18. A. By influencing the level of bank reserves.

19.A. A budget deficit

20. D. It will lower the interest rate.

Explanation:

16. D. An interest rate above equilibrium will result in a surplus of money in the money market as people will want to save more money. This will lead to an increase in the money supply and a higher demand for goods and services. The prices of goods and services will then increase, leading to inflation.

17. D.

The Bank of Canada is the country's central bank, and it is responsible for controlling the supply of money in the economy. The bank sets interest rates, which influence the cost of borrowing money and the level of economic activity. The bank also regulates the country's financial institutions and oversees the payment system. The bank uses a variety of tools to influence the money supply, including open market operations, reserve requirements, and interest rates.

18. A.

The Bank of Canada influences the supply of money by influencing the level of bank reserves. By raising or lowering the reserve requirements, the Bank of Canada can increase or decrease the amount of money that banks have available to lend. This, in turn, affects the amount of money in circulation and the level of economic activity.

19. A.

Deficit spending occurs when the government spends more money than it takes in through taxation and other revenue sources. This type of spending is often used during economic downturns or periods of high unemployment to stimulate the economy by increasing demand. While deficit spending can be helpful in the short-term, it can also lead to long-term problems if the government is not able to generate enough revenue to cover the costs of its spending.

20. D.

An increase in the money supply generally leads to a decrease in interest rates. This is because when the money supply increases, there is more money available for lending, and lending becomes less expensive. This makes it more attractive for borrowers to take out loans, which in turn increases the demand for loans. As the demand for loans increases, interest rates generally decrease.

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