University:
California State University, Northridge
Course:
ECON 101 | Economics for Everyday Life
Academic year:

2023
Views:

8

Pages:

2
Author:

Mahmoud M.

Economics notes Flexible Exchange Rate - The exchange rate is determined by supply and demand and is not directly affected by the Central Bank - It can be affected by the actions of the Central Bank. - Demand for Canadian dollars increases if the Bank of Canada raises Canadian interest rates for foreign countries Supply decreases and exchange rate rises Fixed exchange rate - Central bank in foreign exchange market set by government Stop unregulated supply and demand - Bank of Canada, CAD Wants to adjust the /USD price, will sell CAD for the highest price target and buy CAD under the target - can have no bank limit of CAD, a bank can create up to creeping rate - to reach the same rate as the central bank rate follow the path given by the government or central bank. - The difference between the entry anchors is the target price change - The best fixed exchange rate target balance of the exchange rate The real exchange rate - The relative value of goods produced in Canada compared to goods produced abroad - Real GDP of other countries will come from one unit of Canadian GDP. Bank of Canada - Monetary policy responsibility - Money adjustment - Interest rates to ensure full employment Price stability Inflation is low and does not affect people's decision making. Inflation Control - Inflation rate target range set by the central bank as monetary policy ● Bank of Canada targets annual inflation rate from CPI ● Monetary policy target of 2% ● Bank of Canada, Inflation below interest rate uses CPI as a guide rates set by funds and loans - Central bank affects short-term rates but not long-term rates - Bank of Canada assets are the overnight rate that matters - Overnight rates determine all other short-term rates Low interest rates --> - Borrowing and increase spending, save less High interest rates -- > - borrow less and spend more