Government deposit shifting terminology of policy ch

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3. Government deposit shiftingTerminology of policy (Ch 18):The policy strategy used in Canada is as follows:(a) decide on the goals for employment and the price level
(b) Set the intermediate targets-a set of variables to aim for(for example money supply aggregates like M1). Though these intermediate target have direct effect on employment and the price level(policy goals), but they are not directly affected by Bank of Canada’s policy tools(like Open Market Operations, Government Deposit sifting etc). (c) Policy tools are rather used to aim at operating targets/instruments(overnight interest rate), because operating targets are more responsive to policy tools.In nutshell, the Bank pursues its strategy to it the goals by aiming at targets(both operating and intermediate targets-e.g., overnight interest rate and monetary base) than byaiming at goals directly.Example Step a. Suppose the Bank of Canada thinks that nominal GDP growth of 5% is consistentwith the given goals of employment and inflation. Step b Bank of Canada determines that 4% growth rate of M1(intermediate target) needs to be achieved to maintain 5% of nominal GDP growth.Step c Bank of Canada determines that growth rate of 3% of monetary base( which is operating target or certain target of overnight rate) that will need to be achieved. Bank of Canada will then use its tools(like open market operations) to achieve 3% growth rate of monetary base(MB) which, suppose, is consistent with the target overnight rate. Q. A good definition for intermediate targets of monetary policy would be:
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