Question 1

How do deposits and reserves appear on a bank's T-account?

Accepted Answer

A)  Both deposits and reserves are assets. 
B)  Both deposits and reserves are liabilities. 
C)  Deposits are assets, and reserves are liabilities. 
D)  Reserves are assets, and deposits are liabilities. 
A)  Both deposits and reserves are assets. 
B)  Both deposits and reserves are liabilities. 
C)  Deposits are assets, and reserves are liabilities. 
D)  Reserves are assets, and deposits are liabilities.

Question 2

Who owns the Bank of Canada?

Accepted Answer

A)  the Toronto Stock Exchange 
B)  the US Federal Reserve Bank 
C)  the chartered banks 
D)  the federal government of Canada 
A)  the Toronto Stock Exchange 
B)  the US Federal Reserve Bank 
C)  the chartered banks 
D)  the federal government of Canada

Question 3

If the reserve ratio is 20 percent, how much is the money multiplier?

Accepted Answer

A)  2 
B)  4 
C)  5 
D)  8 
A)  2 
B)  4 
C)  5 
D)  8

Question 4

Suppose the reserve ratio is 20 percent and banks do not hold excess reserves. Suppose the Bank of Canada sells $10 million of bonds to the public. Which statement best describes the effects of this open-market operation?

Accepted Answer

A)  Bank reserves increase by $1 million, and the money supply eventually increases by $10 million. 
B)  Bank reserves increase by $10 million, and the money supply eventually increases by $50 million. 
C)  Bank reserves decrease by $1 million, and the money supply eventually increases by $10 million. 
D)  Bank reserves decrease by $10 million, and the money supply eventually decreases by $50 million. 
A)  Bank reserves increase by $1 million, and the money supply eventually increases by $10 million. 
B)  Bank reserves increase by $10 million, and the money supply eventually increases by $50 million. 
C)  Bank reserves decrease by $1 million, and the money supply eventually increases by $10 million. 
D)  Bank reserves decrease by $10 million, and the money supply eventually decreases by $50 million.

Question 5

In a fractional reserve banking system with no excess reserves and no currency holdings, suppose the central bank buys $100 million of bonds. Which statement best describes the effects of this open-market operation?

Accepted Answer

A)  Reserves and the money supply increase by less than $100 million. 
B)  Reserves increase by $100 million, and the money supply increases by $100 million. 
C)  Reserves increase by $100 million, and the money supply increases by more than $100 million. 
D)  Both reserves and the money supply increase by more than $100 million. 
A)  Reserves and the money supply increase by less than $100 million. 
B)  Reserves increase by $100 million, and the money supply increases by $100 million. 
C)  Reserves increase by $100 million, and the money supply increases by more than $100 million. 
D)  Both reserves and the money supply increase by more than $100 million.

Question 6

Which of the following is quantitative easing?

Accepted Answer

A)  The Bank of Canada sells short-term government securities. 
B)  The Bank of Canada sells long-term government securities. 
C)  The Bank of Canada buys long-term government securities. 
D)  The Bank of Canada buys short-term government securities. 
A)  The Bank of Canada sells short-term government securities. 
B)  The Bank of Canada sells long-term government securities. 
C)  The Bank of Canada buys long-term government securities. 
D)  The Bank of Canada buys short-term government securities.

Question 7

What is a characteristic of paper money?

Accepted Answer

A)  It has a high intrinsic value. 
B)  It hinders efficient allocation of resources. 
C)  It is valuable because it is generally accepted in trade. 
D)  It is valuable only because of the legal tender requirement. 
A)  It has a high intrinsic value. 
B)  It hinders efficient allocation of resources. 
C)  It is valuable because it is generally accepted in trade. 
D)  It is valuable only because of the legal tender requirement.

Question 8

What is a debit card?

Accepted Answer

A)  a form of postponing debt 
B)  a means of payment 
C)  a form of savings 
D)  a means of borrowing 
A)  a form of postponing debt 
B)  a means of payment 
C)  a form of savings 
D)  a means of borrowing

Question 9

A bank has (in millions): $300 reserves, $900 loans, $500 securities, $1000 deposits, and $100 debt. How much is the bank's capital?

Accepted Answer

A)  $100 million 
B)  $600 million 
C)  $1700 million 
D)  $2600 million 
A)  $100 million 
B)  $600 million 
C)  $1700 million 
D)  $2600 million

Question 10

If the Bank of Canada buys bonds in the open market, the money supply decreases.

Accepted Answer

A) True 
 B)False

Question 11

Which statement best explains the role of the Bank of Canada?

Accepted Answer

A)  It maintains a target exchange rate. 
B)  It determines the bank rate. 
C)  It makes loans to large corporations. 
D)  It controls the government budget deficit. 
A)  It maintains a target exchange rate. 
B)  It determines the bank rate. 
C)  It makes loans to large corporations. 
D)  It controls the government budget deficit.

Question 12

In an economy that relies on barter, trade requires a double coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 13

What is the approximate amount of currency in Canada?

Accepted Answer

A)  $84 million 
B)  $840 million 
C)  $84 billion 
D)  $840 billion 
A)  $84 million 
B)  $840 million 
C)  $84 billion 
D)  $840 billion

Question 14

What is the difference between money and wealth?

Accepted Answer

Money is defined as the set of

Question 15

Which list contains only actions that decrease the money supply?

Accepted Answer

A)  raising the bank rate; making open-market purchases 
B)  raising the bank rate; making open-market sales 
C)  lowering the bank rate; making open-market purchases 
D)  lowering the bank rate; making open-market sales 
A)  raising the bank rate; making open-market purchases 
B)  raising the bank rate; making open-market sales 
C)  lowering the bank rate; making open-market purchases 
D)  lowering the bank rate; making open-market sales

Question 16

What is most likely to happen under a fractional reserve banking system?

Accepted Answer

A)  Banks hold more reserves than deposits. 
B)  Banks generally lend out a majority of the funds deposited. 
C)  Banks cause the money supply to fall by lending out reserves. 
D)  Banks only accept savings deposits. 
A)  Banks hold more reserves than deposits. 
B)  Banks generally lend out a majority of the funds deposited. 
C)  Banks cause the money supply to fall by lending out reserves. 
D)  Banks only accept savings deposits.

Question 17

Suppose the reserve ratio is 5 percent, banks do not hold excess reserves, people do not hold currency, and the Bank of Canada purchases $20 million of government bonds. Which statement best describes the effects of Bank of Canada's purchase?

Accepted Answer

A)  Bank reserves increase by $20 million, and the money supply eventually increases by $400 million. 
B)  Bank reserves decrease by $20 million, and the money supply eventually increases by $400 million. 
C)  Bank reserves increase by $20 million, and the money supply eventually decreases by $400 million. 
D)  Bank reserves decrease by $20 million, and the money supply eventually decreases by $400 million. 
A)  Bank reserves increase by $20 million, and the money supply eventually increases by $400 million. 
B)  Bank reserves decrease by $20 million, and the money supply eventually increases by $400 million. 
C)  Bank reserves increase by $20 million, and the money supply eventually decreases by $400 million. 
D)  Bank reserves decrease by $20 million, and the money supply eventually decreases by $400 million.

Question 18

In a fractional reserve banking system, how does an increase in the reserve requirement change the money multiplier?

Accepted Answer

A)  The money multiplier increases by a higher percentage change than the increase in the reserve ratio. 
B)  The money multiplier decreases by a higher percentage change than the increase in the reserve ratio. 
C)  The money multiplier increases by a lower percentage change than the increase in the reserve ratio. 
D)  The money multiplier decreases by a lower percentage change than the increase in the reserve ratio. 
A)  The money multiplier increases by a higher percentage change than the increase in the reserve ratio. 
B)  The money multiplier decreases by a higher percentage change than the increase in the reserve ratio. 
C)  The money multiplier increases by a lower percentage change than the increase in the reserve ratio. 
D)  The money multiplier decreases by a lower percentage change than the increase in the reserve ratio.

Question 19

Which of the following is included in M2 but not in M1+?

Accepted Answer

A)  currency 
B)  demand deposits 
C)  savings deposits 
D)  gold 
A)  currency 
B)  demand deposits 
C)  savings deposits 
D)  gold

Question 20

The Bank of Canada is a privately operated commercial bank.

Accepted Answer

A) True 
 B)False

How do deposits and reserves appear on a bank's T-account?

Who owns the Bank of Canada?

If the reserve ratio is 20 percent, how much is the money multiplier?

Suppose the reserve ratio is 20 percent and banks do not hold excess reserves. Suppose the Bank of Canada sells $10 million of bonds to the public. Which statement best describes the effects of this open-market operation?

In a fractional reserve banking system with no excess reserves and no currency holdings, suppose the central bank buys $100 million of bonds. Which statement best describes the effects of this open-market operation?

Which of the following is quantitative easing?

What is a characteristic of paper money?

What is a debit card?

A bank has (in millions): $300 reserves, $900 loans, $500 securities, $1000 deposits, and $100 debt. How much is the bank's capital?

If the Bank of Canada buys bonds in the open market, the money supply decreases.

Which statement best explains the role of the Bank of Canada?

In an economy that relies on barter, trade requires a double coincidence of wants.

What is the approximate amount of currency in Canada?

What is the difference between money and wealth?

Which list contains only actions that decrease the money supply?

What is most likely to happen under a fractional reserve banking system?

Suppose the reserve ratio is 5 percent, banks do not hold excess reserves, people do not hold currency, and the Bank of Canada purchases $20 million of government bonds. Which statement best describes the effects of Bank of Canada's purchase?

In a fractional reserve banking system, how does an increase in the reserve requirement change the money multiplier?

Which of the following is included in M2 but not in M1+?

The Bank of Canada is a privately operated commercial bank.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters

Exam 10: The Monetary System

How do deposits and reserves appear on a bank's T-account?

Who owns the Bank of Canada?

If the reserve ratio is 20 percent, how much is the money multiplier?

Suppose the reserve ratio is 20 percent and banks do not hold excess reserves. Suppose the Bank of Canada sells $10 million of bonds to the public. Which statement best describes the effects of this open-market operation?

In a fractional reserve banking system with no excess reserves and no currency holdings, suppose the central bank buys $100 million of bonds. Which statement best describes the effects of this open-market operation?

Which of the following is quantitative easing?

What is a characteristic of paper money?

What is a debit card?

A bank has (in millions): $300 reserves, $900 loans, $500 securities, $1000 deposits, and $100 debt. How much is the bank's capital?

If the Bank of Canada buys bonds in the open market, the money supply decreases.

Which statement best explains the role of the Bank of Canada?

In an economy that relies on barter, trade requires a double coincidence of wants.

What is the approximate amount of currency in Canada?

What is the difference between money and wealth?

Which list contains only actions that decrease the money supply?

What is most likely to happen under a fractional reserve banking system?

Suppose the reserve ratio is 5 percent, banks do not hold excess reserves, people do not hold currency, and the Bank of Canada purchases $20 million of government bonds. Which statement best describes the effects of Bank of Canada's purchase?

In a fractional reserve banking system, how does an increase in the reserve requirement change the money multiplier?

Which of the following is included in M2 but not in M1+?

The Bank of Canada is a privately operated commercial bank.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters