Two monetary policy instruments that the Bank of Canada can use are
A)the federal government budget balance and the real interest rate.
B)the quantity of Canadian dollars held in Canadian banks and the quantity fo Canadian dollars held by foreign central banks.
C)the monetary base and the short-term interest rate.
D)the foreign exchange rate and the government budget balance.
E)the current account balance and the capital and financial account balance.

Question

Quizplus · Accepted Answer

The two monetary policy instruments that the Bank of Canada can use are the monetary base (the total amount of currency in circulation plus reserves held by banks at the central bank) and the short-term interest rate (the rate at which banks can borrow funds from the central bank). By adjusting the monetary base and/or the short-term interest rate, the Bank of Canada can influence the overall level of borrowing, spending, and investment in the economy, and thereby impact inflation and economic growth.

Two Monetary Policy Instruments That the Bank of Canada Can