McMaster University Monetary Policy During COVID 19 Pandemic Essay

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Economics

McMaster University

Description

Read the remarks given by Tiff Macklem, Governor of the Bank of Canada, on June 22: “Monetary

policy in the context of COVID-19” (Bank of Canada, June 22, 2020). You can find it on Avenue to

Learn.

2. Answer the following questions in writing.

a. Mr. Macklem describes several ways in which COVID-19 has affected the economy and has

made it more complicated for the Bank of Canada (BoC) to implement their inflation

targeting monetary policy framework. Summarize the different complications that the BoC is

facing.

b. Mr. Macklem also talks about the different ways that the BoC adjusted their policies in

response to COVID-19. One major goal of the BoC was to make sure “that credit would

continue to flow”. Describe the different policy tools that the BoC used to maintain access

to credit.

c. One of the first steps that the BoC took to combat the crisis was to lower their policy

interest rate to the lowest possible level, 0.25 percent, to boost consumer confidence and

economic activity. Using our model of Chapter 9 (“Central Banking and the Money Supply”),

argue how a lowering of the interest rate charged on Central Bank lending helps to boost

economic activity.


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Explanation & Answer

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1

Monetary Policy During COVID-19

Student’s Name
Institutional Affiliation
Course ID and Name
Tutor’s Name
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MONETARY POLICY IN THE CONTEXT OF COVID- 19

2

Monetary Policy During COVID-19
Complications the Bank of Canada Is Facing in Implementing an InflationTargeting Monetary Policy Framework.
The consumer price index of the Canadian people is not currently reflecting on the
inflationary experience. Canadians do not use the same amount of gasoline, air and other items
as the standard times that the pandemic is not there. This means that the spending shifts of
individuals are not regular. Thereby, the Bank of Canada cannot comprehensively use spending
shifts to measure the economy's inflation rate (Macklem, 2020). Additionally, the essential and
firm containment procedures at the beginning of the pandemic period forced the closure of some
jobs that cannot continue remotely. This, in...

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