Question 1

In order for currency to be widely used as a medium of exchange, it is sufficient for the government to designate it as legal tender.

Accepted Answer

A) True 
 B)False

Question 2

M1+ includes savings deposits.

Accepted Answer

A) True 
 B)False

Question 3

-Refer to Table 10-4. If the Bank of Canada requires a reserve ratio of 4 percent, how much in excess reserves does the Bank of the Kawarthas now hold?

Accepted Answer

A)  $600 
B)  $700 
C)  $1440 
D)  $1500 
A)  $600 
B)  $700 
C)  $1440 
D)  $1500

Question 4

If currency is $50 billion, chequable deposits $700 billion, other minor, less liquid categories $300 billion, and credit card debt $500 billion, how much is M1+?

Accepted Answer

A)  $750 billion 
B)  $1000 billion 
C)  $1050 billion 
D)  $1550 billion 
A)  $750 billion 
B)  $1000 billion 
C)  $1050 billion 
D)  $1550 billion

Question 5

Suppose a bank has a 10 percent reserve ratio, $2000 in deposits, and it loans out all it can, given the reserve ratio. Which of the following describes the bank's assets?

Accepted Answer

A)  It has $20 in reserves and $1800 in loans. 
B)  It has $20 in reserves and $1980 in loans. 
C)  It has $200 in reserves and $1800 in loans. 
D)  It has $200 in reserves and $2000 in loans. 
A)  It has $20 in reserves and $1800 in loans. 
B)  It has $20 in reserves and $1980 in loans. 
C)  It has $200 in reserves and $1800 in loans. 
D)  It has $200 in reserves and $2000 in loans.

Question 6

Describe the two things that limit the precision of the Bank of Canada's control of the money supply and explain how each limits that control.

Accepted Answer

First, the Bank of Canada does not contr

Question 7

Who determines the amount of money in the economy?

Accepted Answer

A)  The Bank of Canada controls the money supply precisely. 
B)  The amount of money in the economy does not depend on the behaviour of depositors. 
C)  The amount of money in the economy depends in part on the behaviour of banks. 
D)  The Minister of Finance determines the amount of money in the economy by law. 
A)  The Bank of Canada controls the money supply precisely. 
B)  The amount of money in the economy does not depend on the behaviour of depositors. 
C)  The amount of money in the economy depends in part on the behaviour of banks. 
D)  The Minister of Finance determines the amount of money in the economy by law.

Question 8

When a bank loans out $1000, what happens to the money supply in the long term?

Accepted Answer

A)  It increases by $1000. 
B)  It decreases by $1000. 
C)  It increases by more than $1000. 
D)  It decreases by more than $1000. 
A)  It increases by $1000. 
B)  It decreases by $1000. 
C)  It increases by more than $1000. 
D)  It decreases by more than $1000.

Question 9

-Refer to Table 10-4. Assume that all other banks hold only the required 4 percent of deposits as reserves, and that people hold only deposits and no currency. If the Bank of the Kawarthas decides to hold reserves of 4 percent, by how much would the economy's money supply increase?

Accepted Answer

A)  $30,000 
B)  $35,000 
C)  $42,000 
D)  $45,000 
A)  $30,000 
B)  $35,000 
C)  $42,000 
D)  $45,000

Question 10

A bank has $200 reserves, $800 loans, $400 securities, $1200 deposits, and $100 debt.
a) Calculate the bank's capital.
b) Calculate the bank's leverage ratio.
c) Suppose there is a stock market boom, so that the bank's assets increase by 2 percent. What is the percentage change in the bank's capital? What is the change in the bank's capital in dollars?
d) Suppose that, instead of stock market boom, some borrowers default on their debt so that the bank's assets decrease by 2 percent. How much is now the bank's capital?

Accepted Answer

a) Capital = Assets - Deposits - Debt =

Question 11

-Refer to Table 10-2. If the reserve requirement is 12 percent, what is the state of this bank?

Accepted Answer

A)  It can make a new loan of $17,500. 
B)  It has less reserves than required. 
C)  It has excess reserves of less than $5000. 
D)  It has excess reserves of more than $5000. 
A)  It can make a new loan of $17,500. 
B)  It has less reserves than required. 
C)  It has excess reserves of less than $5000. 
D)  It has excess reserves of more than $5000.

Question 12

Which agency is responsible for regulating the money supply in Canada?

Accepted Answer

A)  Finance Canada 
B)  the Bank of Canada 
C)  the Royal Bank of Canada 
D)  the Canadian Payments Association 
A)  Finance Canada 
B)  the Bank of Canada 
C)  the Royal Bank of Canada 
D)  the Canadian Payments Association

Question 13

What is a credit card?

Accepted Answer

A)  a form of money 
B)  a form of saving 
C)  a form of investing 
D)  a form of payment 
A)  a form of money 
B)  a form of saving 
C)  a form of investing 
D)  a form of payment

Question 14

A bank has (in millions): $300 reserves, $700 loans, $500 securities, $1200 deposits, $100 debt, and $300 capital. How much is the bank's leverage ratio?

Accepted Answer

A)  0.2 
B)  0.25 
C)  5 
D)  30 
A)  0.2 
B)  0.25 
C)  5 
D)  30

Question 15

Which list contains only actions that increase the money supply?

Accepted Answer

A)  making open-market purchases; raising the reserve requirement ratio 
B)  making open-market purchases; lowering the reserve requirement ratio 
C)  making open-market sales; raising the reserve requirement ratio 
D)  making open-market sales; lowering the reserve requirement ratio 
A)  making open-market purchases; raising the reserve requirement ratio 
B)  making open-market purchases; lowering the reserve requirement ratio 
C)  making open-market sales; raising the reserve requirement ratio 
D)  making open-market sales; lowering the reserve requirement ratio

Question 16

What does the calculated amount of currency per person in Canada suggest?

Accepted Answer

A)  People tend to hold too much currency. 
B)  Most payments are made in cash. 
C)  People do not trust banks. 
D)  There is a significant illegal activity. 
A)  People tend to hold too much currency. 
B)  Most payments are made in cash. 
C)  People do not trust banks. 
D)  There is a significant illegal activity.

Question 17

What is the reason behind the seven-year appointment for the governor of Bank of Canada?

Accepted Answer

A)  It makes the system compatible with the ones in other countries. 
B)  It confers stability to the financial system. 
C)  It allows the governor time to implement changes and to analyze the results of those changes. 
D)  It insulates the governor from political pressure. 
A)  It makes the system compatible with the ones in other countries. 
B)  It confers stability to the financial system. 
C)  It allows the governor time to implement changes and to analyze the results of those changes. 
D)  It insulates the governor from political pressure.

Question 18

-Refer to Table 10-4. Assume that all banks hold the same reserve ratio as the Bank of the Kawarthas. What is the money multiplier?

Accepted Answer

A)  3.5 
B)  17.5 
C)  19 
D)  20 
A)  3.5 
B)  17.5 
C)  19 
D)  20

Question 19

How could the Bank of Canada increase the money supply?

Accepted Answer

A)  by selling government bonds 
B)  by decreasing the bank rate 
C)  by increasing the reserve requirement 
D)  by increasing the bank rate 
A)  by selling government bonds 
B)  by decreasing the bank rate 
C)  by increasing the reserve requirement 
D)  by increasing the bank rate

Question 20

The Bank of Canada was created in 1934 in the wake of the Great Depression.

Accepted Answer

A) True 
 B)False

In order for currency to be widely used as a medium of exchange, it is sufficient for the government to designate it as legal tender.

M1+ includes savings deposits.

-Refer to Table 10-4. If the Bank of Canada requires a reserve ratio of 4 percent, how much in excess reserves does the Bank of the Kawarthas now hold?

If currency is $50 billion, chequable deposits $700 billion, other minor, less liquid categories $300 billion, and credit card debt $500 billion, how much is M1+?

Suppose a bank has a 10 percent reserve ratio, $2000 in deposits, and it loans out all it can, given the reserve ratio. Which of the following describes the bank's assets?

Describe the two things that limit the precision of the Bank of Canada's control of the money supply and explain how each limits that control.

Who determines the amount of money in the economy?

When a bank loans out $1000, what happens to the money supply in the long term?

-Refer to Table 10-4. Assume that all other banks hold only the required 4 percent of deposits as reserves, and that people hold only deposits and no currency. If the Bank of the Kawarthas decides to hold reserves of 4 percent, by how much would the economy's money supply increase?

-Refer to Table 10-2. If the reserve requirement is 12 percent, what is the state of this bank?

Which agency is responsible for regulating the money supply in Canada?

What is a credit card?

A bank has (in millions): $300 reserves, $700 loans, $500 securities, $1200 deposits, $100 debt, and $300 capital. How much is the bank's leverage ratio?

Which list contains only actions that increase the money supply?

What does the calculated amount of currency per person in Canada suggest?

What is the reason behind the seven-year appointment for the governor of Bank of Canada?

-Refer to Table 10-4. Assume that all banks hold the same reserve ratio as the Bank of the Kawarthas. What is the money multiplier?

How could the Bank of Canada increase the money supply?

The Bank of Canada was created in 1934 in the wake of the Great Depression.

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

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Exam 10: The Monetary System

In order for currency to be widely used as a medium of exchange, it is sufficient for the government to designate it as legal tender.

M1+ includes savings deposits.

-Refer to Table 10-4. If the Bank of Canada requires a reserve ratio of 4 percent, how much in excess reserves does the Bank of the Kawarthas now hold?

If currency is $50 billion, chequable deposits $700 billion, other minor, less liquid categories $300 billion, and credit card debt $500 billion, how much is M1+?

Suppose a bank has a 10 percent reserve ratio, $2000 in deposits, and it loans out all it can, given the reserve ratio. Which of the following describes the bank's assets?

Describe the two things that limit the precision of the Bank of Canada's control of the money supply and explain how each limits that control.

Who determines the amount of money in the economy?

When a bank loans out $1000, what happens to the money supply in the long term?

-Refer to Table 10-4. Assume that all other banks hold only the required 4 percent of deposits as reserves, and that people hold only deposits and no currency. If the Bank of the Kawarthas decides to hold reserves of 4 percent, by how much would the economy's money supply increase?

-Refer to Table 10-2. If the reserve requirement is 12 percent, what is the state of this bank?

Which agency is responsible for regulating the money supply in Canada?

What is a credit card?

A bank has (in millions): $300 reserves, $700 loans, $500 securities, $1200 deposits, $100 debt, and $300 capital. How much is the bank's leverage ratio?

Which list contains only actions that increase the money supply?

What does the calculated amount of currency per person in Canada suggest?

What is the reason behind the seven-year appointment for the governor of Bank of Canada?

-Refer to Table 10-4. Assume that all banks hold the same reserve ratio as the Bank of the Kawarthas. What is the money multiplier?

How could the Bank of Canada increase the money supply?

The Bank of Canada was created in 1934 in the wake of the Great Depression.

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