16 Tools of Monetary Policy 1. If government deposits at the Bank of Canada are predicted to increase, what open market operations could be undertaken to neutralize the effect on settlement balances?
2. During the holiday season, when the public’s holdings of currency increase, what open market operations typically occur? Why?
3. If the government has just paid for major computer up- grades and as a result its deposits with the Bankof Canada fall, what open market operations could be undertaken?
4. “In the LVTS environment, government deposit shifting is affected by auctions of government
5. Most open market operations are currently repurchasing agreements. What does this tell us about the likely volume of open market operations relative to dynamic open market operations?
6. “The only way that the Bank of Canada can affect the level of advances is by adjusting the bank rate.” Is this statement true, false, or uncertain? Explain your answer.