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To offset upward pressure on the overnight rate, the Bank of Canada would engage in
To offset upward pressure on the overnight rate, the Bank of Canada would engage in... a. A minimum reserve ratio requirement. b. An open-market sale. c. A special purchase and resale agreement. d. A sale and repurchase agreement.
Last year the Canadian dollar-British pound exchange rate was given by C$1.66 = £1. Today, it is C$1.71 = £1. Based on that, we can say that the Canadian dollar and the British pound o a. Depreciated; appreciated. b. Depreciated; depreciated. c. Appreciated; depreciated. d. Appreciated; appreciated.
An open-market sale is appropriate when there is a ... a. Contractionary gap. b. Budget surplus. c. Budget deficit. d. Inflationary gap.
Expert Solution
1. To offset upward pressure on the overnight rate, the Bank of Canada would engage in
C. A special purchase and resale agreement.
2. Last year £ 1 = C $ 1.66
This year, £ 1 = C $ 1.71
To buy same 1 pound we have to spend more Canadian dollar.
Thus, Canadian Dollar has depreciated and British Pound has appreciated.
Option A.
3. An open market sale is appropriate when there is a inflationary gap.
In order to reduce the purchasing power of consumers the federal bank may sale securities to reduce the buying power.
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