CSC CHAPTER 5 * Fiscal policy affects the economy in the following way: * Its spending and/or direct transfers to citizens * Taxes of various types, including direct income, sales, payroll, capital, and property taxes * Deficits, which tend to stimulate the economy, while falling deficits (or surpluses) generally do the opposite * Automatic stabilizers, which automatically move counter to the business cycle (unemployment insurance payments increase as unemployment rises, while income taxes rise as economic growth increases) * Responsibilities of the central bank include: * Issuing the nations currency * Acting as banker to the central government * Operating monetary policy * Its general duties include: * Regulating credit and currency * Controlling and protecting the external value of the national monetary unit * Mitigating by its influence, fluctuations in the general level of production; * Promoting the economic welfare of Canada * The major functions of the Bank are * Acting for the government in the issuance of bank notes; * Acting as the government’s chief fiscal agent and financial advisor. As a fiscal agent, the Bank advises the government on financial matters; administers the deposit and fund accounts; manages international currency reserves and operates for the government in foreign exchange markets; acts as a depository for gold; and acts as the governments debt manager in issuing new debt securities and paying interest on them and retiring them * Conducting monetary policy, which is the banks most important function * Bank rate is the rate at which the bank of Canada is willing to lend short term funds to the chartered banks, in its role as lender of last resort. * The bank rate has been set equal to the ceiling of its target range for overnight money rates since 1996. *