A the facility at which banks can borrow reserves

A) the facility at which banks can borrow reserves from the Bank of Canada
B) a temporary lending facility
C) a permanent lending facility
D) a daily lending facility
Answer: A
Diff: 2 Type: MC
Skill: Recall
Objective: 16.3 Summarize how conventional monetary policy tools are implemented and the
relative advantages and limitations of each tool
31) One of the Bank of Canada's most important roles is to be ________.
A) the Federal government's banker
B) the issuer of government debt
C) a lender-of-last-resort
D) a regulator of banks
Answer: C
Diff: 1 Type: MC
Skill: Recall
Objective: 16.3 Summarize how conventional monetary policy tools are implemented and the
relative advantages and limitations of each tool

32) The Bank of Canada's lender-of-last-resort function ________.
A) is no longer necessary due to CDIC insurance
B) has proven to be ineffective
C) is needed to prevent runs by large-denomination depositors
D) A and B only.
Answer: C
Diff: 2 Type: MC
Skill: Recall
Objective: 16.3 Summarize how conventional monetary policy tools are implemented and the
relative advantages and limitations of each tool
33) Explain the Bank of Canada's open market operations? What are SPRAs and SRAs? How
are they used to impact the overnight rate?
Answer: SPRA is special Purchase and Resale Agreement and SRA is a Sale and Repurchase
Agreement. SPRAS are used to relieve undesired upward pressure on the overnight interest
rate. SRAs alleviated undesired downward pressure on the overnight financing rate. Both are
temporary measures.
Diff: 2 Type: ES
Skill: Recall
Objective: 16.3 Summarize how conventional monetary policy tools are implemented and the
relative advantages and limitations of each tool
34) What are the advantages of SPRAs and SRAs?
Answer: 1. The Bank of Canada has complete control over them as they occur at the initiative
of the Bank of Canada.
2. They are flexible and precise; together with the Bank's standing facilities they can be used to
any extent.
3. They are easily reversed.
4. They can be implemented quickly.
Diff: 3 Type: ES
Skill: Recall
Objective: 16.3 Summarize how conventional monetary policy tools are implemented and the
relative advantages and limitations of each tool
35) What are the advantages and disadvantages of the Bank's lending policy?
Answer: The most important advantage is that the Bank can use it to perform its role of lender
of last resort. But it is less effective compared to open market operations for two reasons. Open
market buyback operations are completely at the discretion of the Bank of Canada, whereas the
volume of normal advances is not. The Bank can change the bank rate but in the current
channel/corridor system can't make banks borrow. In addition, open market buyback operations
are more easily reversed than changes in Bank lending policy.
Diff: 3 Type: ES
Skill: Recall
Objective: 16.3 Summarize how conventional monetary policy tools are implemented and the
relative advantages and limitations of each tool