EC140 Chapter Notes - Chapter 30: Capital Loss, Potential Output, Nominal Interest Rate
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EC140 Full Course Notes
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Businesses are able to anticipate future rates and inflation, making better investments: target provides an anchor for expectations about future inflation. Responsibility for monetary policy: governing council of bank of canada: governor, senior deputy governor and 4 deputy governors, boc act required regular consultations on monetary policy b/n the. Decrease quantity of money, both interest rate and exchange rate would rise. Raise interest rate, quantity of money would decrease and exchange rate would rise. Hitting the overnight rate target: once an interest rate decision is made, boc achieves its targets using, operating band: target overnight rate plus or minus 0. 25% Bank rate: interest rate that the boc charges big banks on loans reserves: target overnight rate plus 0. 25% Settlement balances rate: interest rate the boc pays on: target overnight rate minus 0. 25% Alternative to lending is to hold reserves. Alternative to borrowing is to hold smaller reserves. Demand fore reserves is lending and borrowing in the overnight market.
