492 PA R T V Central Banking and the Conduct of Monetary Policy 16 Because inflation targeting focuses on achieving the inflation target, it will lead to excessive output fluctuations Is this statement true, false, or uncertain? Explain your answer *17 What are the most important advantages and disadvantages of nominal GDP targeting over inflation targeting? 18 The failure of the Bank of Canada to control the money supply in the 1970s and 1980s suggests that the Bank is not able to control the money supply Do you agree or disagree? Explain your answer *19 What is the advantage that monetary targeting, inflation targeting, and a monetary strategy with an implicit, but not an explicit, nominal anchor have in common? 20 How can bank behaviour and the Bank of Canada s behaviour cause money supply growth to be procyclical (rising in booms and falling in recessions)? WEB EXERCISES Go the a b to www.bankofcanada.ca, and click on About Bank and then What We Do Review the Bank of Canada s main functions How does the Bank s monetary policy contribute to rising living standards for Canadians? It is possible to access other central bank websites to learn about their structure One example is the European Central Bank Go to www.ecb.int/index html On the ECB home page, locate the current exchange rate between the euro and the U.S dollar It was initially set at to What is it now? Many countries have central banks that are responsible for their nation s monetary policy Go to www.bis.org/cbanks.htm and select one of the central banks (for example, Norway) Review that bank s website to determine its policies regarding application of monetary policy How does this bank s policies compare to those of the Bank of Canada? Be sure to visit the MyEconLab website at www.myeconlab.com.This online homework and tutorial system puts you in control of your own learning with study and practice tools directly correlated to this chapter content