Question 1

Choose the statement that is incorrect.

Accepted Answer

A) 100 percent reserve banking is a system in which banks keep the full amount of their depositors' funds as a cash reserve. 
B) Fractional- reserve banking was invented by gold prospectors in the Canadian Yukon during the gold rush. 
C) Fractional- reserve banking is a system in which banks keep a fraction of their depositors' funds as a cash reserve and lend the rest. 
D) The Austrian School of economists say that fractional- reserve banking violates property rights because the bank has no legal right to lend a deposit to someone else. 
E) The requirement to hold 100 percent reserves lowers bank profits. 
A) 100 percent reserve banking is a system in which banks keep the full amount of their depositors' funds as a cash reserve. 
B) Fractional- reserve banking was invented by gold prospectors in the Canadian Yukon during the gold rush. 
C) Fractional- reserve banking is a system in which banks keep a fraction of their depositors' funds as a cash reserve and lend the rest. 
D) The Austrian School of economists say that fractional- reserve banking violates property rights because the bank has no legal right to lend a deposit to someone else. 
E) The requirement to hold 100 percent reserves lowers bank profits.

Question 2

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 a decrease in real GDP?

Accepted Answer

A) A movement from A to E 
B) A movement from B to C 
C) A movement from E to A 
D) A movement from A to C 
E) A movement from A to B 
A) A movement from A to E 
B) A movement from B to C 
C) A movement from E to A 
D) A movement from A to C 
E) A movement from A to B

Question 3

If the prices of goods and services are stated in terms of kilograms of salt, then salt is

Accepted Answer

A) a renewable resource. 
B) a medium of exchange. 
C) a store of value. 
D) a unit of account. 
E) quasi- money. 
A) a renewable resource. 
B) a medium of exchange. 
C) a store of value. 
D) a unit of account. 
E) quasi- money.

Question 4

Money's function as a store of value can best be described as

Accepted Answer

A) an agreed- upon measure for stating the prices of goods and services. 
B) a generally acceptable exchange system. 
C) an efficient means of writing contracts over a long time period. 
D) a guarantee of a double coincidence of wants. 
E) something that can be held and exchanged later for goods and services. 
A) an agreed- upon measure for stating the prices of goods and services. 
B) a generally acceptable exchange system. 
C) an efficient means of writing contracts over a long time period. 
D) a guarantee of a double coincidence of wants. 
E) something that can be held and exchanged later for goods and services.

Question 5

The monetary base is the sum of

Accepted Answer

A) Bank of Canada notes held within the Bank of Canada, bank deposits at the Bank of Canada, and coins held by banks. 
B) Bank of Canada notes held within the Bank of Canada, bank deposits at the Bank of Canada, and coins held by banks and the public. 
C) Bank of Canada notes held outside the Bank of Canada, bank deposits at the Bank of Canada, and notes and coins held by banks. 
D) Bank of Canada notes held outside the Bank of Canada, bank deposits at the Bank of Canada, and coins held by banks and the public. 
E) Bank of Canada notes held outside the Bank of Canada, the desired reserves of chartered banks, and coins held by banks. 
A) Bank of Canada notes held within the Bank of Canada, bank deposits at the Bank of Canada, and coins held by banks. 
B) Bank of Canada notes held within the Bank of Canada, bank deposits at the Bank of Canada, and coins held by banks and the public. 
C) Bank of Canada notes held outside the Bank of Canada, bank deposits at the Bank of Canada, and notes and coins held by banks. 
D) Bank of Canada notes held outside the Bank of Canada, bank deposits at the Bank of Canada, and coins held by banks and the public. 
E) Bank of Canada notes held outside the Bank of Canada, the desired reserves of chartered banks, and coins held by banks.

Question 6

When the interest rate falls in the money market, the quantity of money demanded _______ and the quantity of money supplied _______.

Accepted Answer

A) increases; decreases 
B) remains unchanged; decreases 
C) increases; remains unchanged 
D) remains unchanged; remains unchanged 
E) decreases; increases 
A) increases; decreases 
B) remains unchanged; decreases 
C) increases; remains unchanged 
D) remains unchanged; remains unchanged 
E) decreases; increases

Question 7

Use the information below to answer the following questions.
Fact 8.1.2
Currency held by individuals and businesses is $57 billion; chequable deposits owned by individuals and businesses are $211 non- chequable personal deposits are $163 billion; non- chequable business deposits are $29 billion; and fixed term deposits are $303 billion.
-Consider Fact 8.1.2.M2 is

Accepted Answer

A) $268 billion. 
B) $57 billion. 
C) $763 billion. 
D) $460 billion. 
E) $431 billion 
A) $268 billion. 
B) $57 billion. 
C) $763 billion. 
D) $460 billion. 
E) $431 billion

Question 8

Use the information below to answer the following questions.
Fact 8.4.2
The Bank of Hobbiton has chosen the following initial balance sheet:
  
-Refer to Fact 8.4.2.Based on the Bank of Hobbiton's initial balance sheet, what is its desired reserve ratio?

Accepted Answer

A) 10 percent 
B) 5 percent 
C) 100 percent 
D) 20 percent 
E) cannot be calculated with the available information 
A) 10 percent 
B) 5 percent 
C) 100 percent 
D) 20 percent 
E) cannot be calculated with the available information

Question 9

Use the information below to answer the following question.
Fact 8.1.1
The information describes a banking system.All banks are holding their desired reserves.
  
-Refer to Fact 8.1.1.The quantity of money as measured by M1 is equal to

Accepted Answer

A) $1,500. 
B) $6,500. 
C) $6,000. 
D) $2,500. 
E) $7,000. 
A) $1,500. 
B) $6,500. 
C) $6,000. 
D) $2,500. 
E) $7,000.

Choose the statement that is incorrect.

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 a decrease in real GDP?

If the prices of goods and services are stated in terms of kilograms of salt, then salt is

Money's function as a store of value can best be described as

The monetary base is the sum of

When the interest rate falls in the money market, the quantity of money demanded _ and the quantity of money supplied _.

Use the information below to answer the following questions. Fact 8.4.2 The Bank of Hobbiton has chosen the following initial balance sheet: -Refer to Fact 8.4.2.Based on the Bank of Hobbiton's initial balance sheet, what is its desired reserve ratio?

Use the information below to answer the following question. Fact 8.1.1 The information describes a banking system.All banks are holding their desired reserves. -Refer to Fact 8.1.1.The quantity of money as measured by M1 is equal to

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

Choose the statement that is incorrect.

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 a decrease in real GDP?

If the prices of goods and services are stated in terms of kilograms of salt, then salt is

Money's function as a store of value can best be described as

The monetary base is the sum of

When the interest rate falls in the money market, the quantity of money demanded _______ and the quantity of money supplied _______.

Use the information below to answer the following questions. Fact 8.4.2 The Bank of Hobbiton has chosen the following initial balance sheet: -Refer to Fact 8.4.2.Based on the Bank of Hobbiton's initial balance sheet, what is its desired reserve ratio?

Use the information below to answer the following question. Fact 8.1.1 The information describes a banking system.All banks are holding their desired reserves. -Refer to Fact 8.1.1.The quantity of money as measured by M1 is equal to

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

When the interest rate falls in the money market, the quantity of money demanded _ and the quantity of money supplied _.