Question 1

During a period of severe inflation, which function of money is most seriously affected?

Accepted Answer

A) barter 
B) unit of account 
C) store of value 
D) medium of exchange 
E) means of payment 
A) barter 
B) unit of account 
C) store of value 
D) medium of exchange 
E) means of payment

Question 2

Which one of the following is not money?

Accepted Answer

A) a credit card 
B) a chequable deposit 
C) Canadian currency 
D) a fixed term deposit 
E) a non- chequable deposit 
A) a credit card 
B) a chequable deposit 
C) Canadian currency 
D) a fixed term deposit 
E) a non- chequable deposit

Question 3

Which one of the following is considered to be money?

Accepted Answer

A) a debit card 
B) a blank cheque 
C) a lottery ticket 
D) a credit card 
E) a chequable deposit 
A) a debit card 
B) a blank cheque 
C) a lottery ticket 
D) a credit card 
E) a chequable deposit

Question 4

Which one of the following is a component of M2 but not of M1?

Accepted Answer

A) currency in a bank vault 
B) personal chequable deposits 
C) non- personal chequable deposits 
D) personal non- chequable deposits 
E) currency outside banks 
A) currency in a bank vault 
B) personal chequable deposits 
C) non- personal chequable deposits 
D) personal non- chequable deposits 
E) currency outside banks

Question 5

A financial firm that takes deposits from households and firms is

Accepted Answer

A) a usurer. 
B) a central bank. 
C) a depository institution. 
D) a pawn shop. 
E) a credit company. 
A) a usurer. 
B) a central bank. 
C) a depository institution. 
D) a pawn shop. 
E) a credit company.

Question 6

If people decide to transfer their currency into their bank deposits then,

Accepted Answer

A) the quantity of money decreases. 
B) the actual reserves of banks increase. 
C) the quantity of money to increases immediately. 
D) interest rates rise. 
E) the inflation rate falls. 
A) the quantity of money decreases. 
B) the actual reserves of banks increase. 
C) the quantity of money to increases immediately. 
D) interest rates rise. 
E) the inflation rate falls.

Question 7

Use the information below to answer the following questions.
Fact 8.4.1
The Bank of Speedy Creek has chosen the following initial balance sheet:
  
-Refer to Fact 8.4.1.Huck Finn comes along and deposits $10.After Huck's deposit, but before any other actions occur, the total amount of money in the economy

Accepted Answer

A) has stayed the same, with its components unchanged. 
B) has fallen, with currency decreasing and deposits staying the same. 
C) has risen, with currency unchanged and deposits increasing. 
D) has fallen, with currency decreasing and deposits unchanged. 
E) has stayed the same, with currency decreasing and deposits increasing. 
A) has stayed the same, with its components unchanged. 
B) has fallen, with currency decreasing and deposits staying the same. 
C) has risen, with currency unchanged and deposits increasing. 
D) has fallen, with currency decreasing and deposits unchanged. 
E) has stayed the same, with currency decreasing and deposits increasing.

Question 8

The Canadian money multiplier is calculated as the

Accepted Answer

A) change in monetary base divided by the change in deposits. 
B) change in quantity of bank notes divided by the change in monetary base. 
C) change in the quantity of money divided by the change in the monetary base. 
D) change in monetary base divided by the change in quantity of money. 
E) change in monetary base divided by the change in currency holdings of households. 
A) change in monetary base divided by the change in deposits. 
B) change in quantity of bank notes divided by the change in monetary base. 
C) change in the quantity of money divided by the change in the monetary base. 
D) change in monetary base divided by the change in quantity of money. 
E) change in monetary base divided by the change in currency holdings of households.

Question 9

Which of the following does not affect the size of the monetary base?

Accepted Answer

A) the amount of coins issued by the Canadian Mint 
B) the amount of notes issued by the Bank of Canada 
C) the amount of chartered bank deposits at the Bank of Canada 
D) the amount of loans issued by chartered banks 
E) none of the above 
A) the amount of coins issued by the Canadian Mint 
B) the amount of notes issued by the Bank of Canada 
C) the amount of chartered bank deposits at the Bank of Canada 
D) the amount of loans issued by chartered banks 
E) none of the above

Question 10

Suppose that a country has $50 billion in bank reserves, $100 billion in currency held by the public, and $500 billion in bank deposits.The currency drain ratio is

Accepted Answer

A) 30%. 
B) 10%. 
C) 50%. 
D) 20%. 
E) 18%. 
A) 30%. 
B) 10%. 
C) 50%. 
D) 20%. 
E) 18%.

Question 11

Choose the correct statement.

Accepted Answer

A) The quantity of money measured in dollars is nominal money. 
B) The quantity of money measured in constant dollars is nominal money. 
C) The quantity of nominal money demanded is inversely related to the price level. 
D) As the interest rate rises, the quantity of real money demanded increases. 
E) As real GDP increases, the quantity of nominal money demanded decreases. 
A) The quantity of money measured in dollars is nominal money. 
B) The quantity of money measured in constant dollars is nominal money. 
C) The quantity of nominal money demanded is inversely related to the price level. 
D) As the interest rate rises, the quantity of real money demanded increases. 
E) As real GDP increases, the quantity of nominal money demanded decreases.

Question 12

Everything else remaining the same, an increase in real GDP

Accepted Answer

A) does not change the demand for real money. 
B) increases the demand for real money. 
C) decreases the demand for real money. 
D) increases the demand for real money up to a point, and then demand will automatically fall. 
E) decreases the demand for real money up to a point, and then demand will automatically rise. 
A) does not change the demand for real money. 
B) increases the demand for real money. 
C) decreases the demand for real money. 
D) increases the demand for real money up to a point, and then demand will automatically fall. 
E) decreases the demand for real money up to a point, and then demand will automatically rise.

Question 13

Quantitative easing

Accepted Answer

A) is an open market purchase of securities by the U.S.Federal Reserve. 
B) raises the nominal interest rate. 
C) decreases bank reserves. 
D) is an open market sale of securities by the U.S.Federal Reserve. 
E) is an open market purchase of securities by the Government of Canada. 
A) is an open market purchase of securities by the U.S.Federal Reserve. 
B) raises the nominal interest rate. 
C) decreases bank reserves. 
D) is an open market sale of securities by the U.S.Federal Reserve. 
E) is an open market purchase of securities by the Government of Canada.

Question 14

The equation of exchange is

Accepted Answer

A) Y = M. 
B) MV = P. 
C) MV = PY. 
D) MP = VY. 
E) PV = M. 
A) Y = M. 
B) MV = P. 
C) MV = PY. 
D) MP = VY. 
E) PV = M.

Question 15

Use the figure below to answer the following questions.
   Figure 8.5.2
-Refer to Figure 8.5.2.Which one of the following best shows the effect of an increase in real GDP?

Accepted Answer

A) Movement from E to A 
B) Movement from A to C 
C) Movement from B to A 
D) Movement from A to E 
E) Movement from A to F 
A) Movement from E to A 
B) Movement from A to C 
C) Movement from B to A 
D) Movement from A to E 
E) Movement from A to F

Question 16

Excess reserves are

Accepted Answer

A) desired reserves minus actual reserves. 
B) required reserves minus desired reserves. 
C) actual reserves minus desired reserves. 
D) liquidity funds minus actual reserves. 
E) required reserves minus actual reserves. 
A) desired reserves minus actual reserves. 
B) required reserves minus desired reserves. 
C) actual reserves minus desired reserves. 
D) liquidity funds minus actual reserves. 
E) required reserves minus actual reserves.

Question 17

Which of the following is an asset of the Bank of Canada?

Accepted Answer

A) depository institution deposits 
B) deposits of private Canadian citizens 
C) loans to private Canadian citizens 
D) loans to depository institutions 
E) Bank of Canada notes 
A) depository institution deposits 
B) deposits of private Canadian citizens 
C) loans to private Canadian citizens 
D) loans to depository institutions 
E) Bank of Canada notes

Question 18

GDP is $2,000 billion, the GDP deflator is 100 a price level of 1), and the velocity of circulation is 5.The quantity of money is

Accepted Answer

A) $20 billion. 
B) $2,000 billion. 
C) $10,000 billion. 
D) $400 billion. 
E) $500 billion. 
A) $20 billion. 
B) $2,000 billion. 
C) $10,000 billion. 
D) $400 billion. 
E) $500 billion.

Question 19

Liquidity is

Accepted Answer

A) the degree of uncertainty about the price of a financial asset. 
B) the net flow of gold into the Bank of Canada. 
C) the risk encountered by holding a financial asset. 
D) the degree of stability of the banking system. 
E) the property of being easily convertible into a means of payment without loss in value. 
A) the degree of uncertainty about the price of a financial asset. 
B) the net flow of gold into the Bank of Canada. 
C) the risk encountered by holding a financial asset. 
D) the degree of stability of the banking system. 
E) the property of being easily convertible into a means of payment without loss in value.

Question 20

Use the information below to answer the following question.
Fact 8.7.1
The Bank of Speedy Creek has chosen the following initial balance sheet:
  
-Refer to Fact 8.7.1.Suppose all the banks in the banking system have the same desired reserve ratio as the Bank of Speedy Creek.If the currency drain ratio is 32 percent, what is the size of the money multiplier?

Accepted Answer

A) 1.25 
B) 5.0 
C) 2.7 
D) 3.3 
E) 4.0 
A) 1.25 
B) 5.0 
C) 2.7 
D) 3.3 
E) 4.0

During a period of severe inflation, which function of money is most seriously affected?

Which one of the following is not money?

Which one of the following is considered to be money?

Which one of the following is a component of M2 but not of M1?

A financial firm that takes deposits from households and firms is

If people decide to transfer their currency into their bank deposits then,

The Canadian money multiplier is calculated as the

Which of the following does not affect the size of the monetary base?

Suppose that a country has $50 billion in bank reserves, $100 billion in currency held by the public, and $500 billion in bank deposits.The currency drain ratio is

Choose the correct statement.

Everything else remaining the same, an increase in real GDP

Quantitative easing

The equation of exchange is

Use the figure below to answer the following questions. Figure 8.5.2 -Refer to Figure 8.5.2.Which one of the following best shows the effect of an increase in real GDP?

Excess reserves are

Which of the following is an asset of the Bank of Canada?

GDP is $2,000 billion, the GDP deflator is 100 a price level of 1), and the velocity of circulation is 5.The quantity of money is

Liquidity is

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 8: Money, the Price Level, and Inflation

During a period of severe inflation, which function of money is most seriously affected?

Which one of the following is not money?

Which one of the following is considered to be money?

Which one of the following is a component of M2 but not of M1?

A financial firm that takes deposits from households and firms is

If people decide to transfer their currency into their bank deposits then,

The Canadian money multiplier is calculated as the

Which of the following does not affect the size of the monetary base?

Suppose that a country has $50 billion in bank reserves, $100 billion in currency held by the public, and $500 billion in bank deposits.The currency drain ratio is

Choose the correct statement.

Everything else remaining the same, an increase in real GDP

Quantitative easing

The equation of exchange is

Use the figure below to answer the following questions. Figure 8.5.2 -Refer to Figure 8.5.2.Which one of the following best shows the effect of an increase in real GDP?

Excess reserves are

Which of the following is an asset of the Bank of Canada?

GDP is $2,000 billion, the GDP deflator is 100 a price level of 1), and the velocity of circulation is 5.The quantity of money is

Liquidity is

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters