Question 1

The easy money of Japan during the 1990s and early 2000s:

Accepted Answer

A) was effective in reducing high inflation. 
B) was effective in stimulating the economy. 
C) suffered from cyclical asymmetry. 
D) resulted in an increase in aggregate supply. 
A) was effective in reducing high inflation. 
B) was effective in stimulating the economy. 
C) suffered from cyclical asymmetry. 
D) resulted in an increase in aggregate supply.

Question 2

In the Bank of Canada's consolidated balance sheet, the largest asset is:

Accepted Answer

A) loans to chartered banks. 
B) notes in circulation. 
C) government deposits. 
D) government securities. 
A) loans to chartered banks. 
B) notes in circulation. 
C) government deposits. 
D) government securities.

Question 3

An expansionary monetary policy is appropriate for the alleviation of domestic:

Accepted Answer

A) unemployment and compatible with the goal of correcting a trade deficit. 
B) unemployment and compatible with the goal of correcting a trade surplus. 
C) inflation and compatible with the goal of correcting a trade deficit. 
D) inflation and compatible with the goal of correcting a trade surplus. 
A) unemployment and compatible with the goal of correcting a trade deficit. 
B) unemployment and compatible with the goal of correcting a trade surplus. 
C) inflation and compatible with the goal of correcting a trade deficit. 
D) inflation and compatible with the goal of correcting a trade surplus.

Question 4

If the government pursues a restrictive monetary policy, then it will:

Accepted Answer

A) increase domestic interest rates, cause the dollar to appreciate, and decrease net exports. 
B) decrease domestic interest rates, cause the dollar to depreciate, and increase net exports. 
C) increase domestic interest rates, cause the dollar to depreciate, and increase net exports. 
D) increase domestic interest rates, cause the dollar to appreciate, and increase net exports. 
A) increase domestic interest rates, cause the dollar to appreciate, and decrease net exports. 
B) decrease domestic interest rates, cause the dollar to depreciate, and increase net exports. 
C) increase domestic interest rates, cause the dollar to depreciate, and increase net exports. 
D) increase domestic interest rates, cause the dollar to appreciate, and increase net exports.

Question 5

Refer to the above diagram for the market for money.The total demand for money is shown by:

Accepted Answer

A) D1. 
B) D2. 
C) S. 
D) D3. 
A) D1. 
B) D2. 
C) S. 
D) D3.

Question 6

In terms of the aggregate demand and aggregate supply model, the sale of government bonds by the Bank of Canada to chartered banks will:

Accepted Answer

A) increase aggregate supply. 
B) decrease aggregate supply. 
C) increase aggregate demand. 
D) decrease aggregate demand. 
A) increase aggregate supply. 
B) decrease aggregate supply. 
C) increase aggregate demand. 
D) decrease aggregate demand.

Question 7

On the liability side of the Bank of Canada's consolidated balance sheet, the three main categories are:

Accepted Answer

A) advances to chartered banks, government securities and deposits. 
B) treasury bills of Canada, government deposits and securities. 
C) chartered bank deposits, government deposits and notes in circulation. 
D) chartered banks deposits, advances to chartered banks and notes in circulation. 
A) advances to chartered banks, government securities and deposits. 
B) treasury bills of Canada, government deposits and securities. 
C) chartered bank deposits, government deposits and notes in circulation. 
D) chartered banks deposits, advances to chartered banks and notes in circulation.

Question 8

If the dollars held for transactions purposes are, on the average, spent four times a year for final goods and services, then the quantity of money people will wish to hold for transactions is equal to:

Accepted Answer

A) four percent of nominal GDP. 
B) 25 percent of nominal GDP. 
C) nominal GDP multiplied times 4. 
D) nominal GDP divided by 25. 
A) four percent of nominal GDP. 
B) 25 percent of nominal GDP. 
C) nominal GDP multiplied times 4. 
D) nominal GDP divided by 25.

Question 9

If during a certain period the Bank of Canada's policy target was to stabilize the money supply, we would expect:

Accepted Answer

A) less inflation than if the Bank of Canada's policy was to stabilize interest rates. 
B) tax revenues to fall. 
C) interest rates to be quite volatile. 
D) interest rates to be unusually stable. 
A) less inflation than if the Bank of Canada's policy was to stabilize interest rates. 
B) tax revenues to fall. 
C) interest rates to be quite volatile. 
D) interest rates to be unusually stable.

Question 10

Refer to the above diagram for the market for money.If each dollar held for transactions purposes is spent four times per year on the average, we can infer that the:

Accepted Answer

A) real GDP is $800. 
B) nominal GDP is $800. 
C) money supply must be $800. 
D) nominal GDP is $1,200. 
A) real GDP is $800. 
B) nominal GDP is $800. 
C) money supply must be $800. 
D) nominal GDP is $1,200.

Question 11

A restrictive monetary policy may not be effective if the investment-demand curve shifts to the left.

Accepted Answer

A) True 
 B)False

Question 12

The so-called Taylor Rule states that:

Accepted Answer

A) monetary policy should only respond to the changes in real GDP and not in inflation. 
B) monetary policy should only respond to the changes in inflation and not in real GDP. 
C) monetary policy should respond to changes in both real GDP and inflation. 
D) Monetary policy should only respond to changes in unemployment rate. 
A) monetary policy should only respond to the changes in real GDP and not in inflation. 
B) monetary policy should only respond to the changes in inflation and not in real GDP. 
C) monetary policy should respond to changes in both real GDP and inflation. 
D) Monetary policy should only respond to changes in unemployment rate.

Question 13

Refer to the above market for money diagram.If the interest rate was at 3 percent, people would:

Accepted Answer

A) sell bonds, which would cause bond prices to fall and the interest rate to rise. 
B) buy bonds, which would cause bond prices to fall and the interest rate to rise. 
C) sell bonds, which would cause bond prices to rise and the interest rate to rise. 
D) buy bonds, which would cause bond prices to rise but have an uncertain effect upon the interest rate. 
A) sell bonds, which would cause bond prices to fall and the interest rate to rise. 
B) buy bonds, which would cause bond prices to fall and the interest rate to rise. 
C) sell bonds, which would cause bond prices to rise and the interest rate to rise. 
D) buy bonds, which would cause bond prices to rise but have an uncertain effect upon the interest rate.

Question 14

A newspaper headline reads: "Bank of Canada Raises the overnight rate for third time this year." This headline indicates that the Bank of Canada is most likely trying to:

Accepted Answer

A) stimulate the economy. 
B) increase the money supply. 
C) reduce the cost of credit. 
D) reduce inflationary pressures in the economy. 
A) stimulate the economy. 
B) increase the money supply. 
C) reduce the cost of credit. 
D) reduce inflationary pressures in the economy.

Question 15

Which of the following is correct?

Accepted Answer

A) An expansionary monetary policy will cause the dollar to depreciate and will increase Canadian net exports. 
B) An expansionary monetary policy will cause the dollar to depreciate and will decrease Canadian net exports. 
C) An expansionary monetary policy will cause the dollar to appreciate and will increase Canadian net exports. 
D) An expansionary monetary policy will cause the dollar to appreciate and will decrease Canadian net exports. 
A) An expansionary monetary policy will cause the dollar to depreciate and will increase Canadian net exports. 
B) An expansionary monetary policy will cause the dollar to depreciate and will decrease Canadian net exports. 
C) An expansionary monetary policy will cause the dollar to appreciate and will increase Canadian net exports. 
D) An expansionary monetary policy will cause the dollar to appreciate and will decrease Canadian net exports.

Question 16

Which statement is true?

Accepted Answer

A) Bond prices and the interest rate are inversely related. 
B) A lower interest rate raises the opportunity cost of holding money. 
C) The supply of money is directly related to the interest rate. 
D) The total demand for money is directly related to the interest rate. 
A) Bond prices and the interest rate are inversely related. 
B) A lower interest rate raises the opportunity cost of holding money. 
C) The supply of money is directly related to the interest rate. 
D) The total demand for money is directly related to the interest rate.

Question 17

The price of a bond with no expiration date is originally $5,000 and it pays an annual interest payment of $500.If the price of the bond falls to $3,000, then the effective interest rate yield to a new buyer of the bond is:

Accepted Answer

A) 14.4 percent. 
B) 16.6 percent. 
C) 11.0 percent. 
D) 9.0 percent. 
A) 14.4 percent. 
B) 16.6 percent. 
C) 11.0 percent. 
D) 9.0 percent.

Question 18

Restrictive monetary policies are most likely to be used by the central bank when an economy faces:

Accepted Answer

A) a high rate of inflation. 
B) a high rate of unemployment. 
C) a recession. 
D) a negative GDP gap. 
A) a high rate of inflation. 
B) a high rate of unemployment. 
C) a recession. 
D) a negative GDP gap.

Question 19

The purpose of an expansionary monetary policy is to:

Accepted Answer

A) increase aggregate demand. 
B) decrease aggregate demand. 
C) increase investment demand. 
D) decrease investment demand. 
A) increase aggregate demand. 
B) decrease aggregate demand. 
C) increase investment demand. 
D) decrease investment demand.

Question 20

The Bank of Canada often communicates its intentions to tighten or loosen monetary policy by announcing a change in targets for:

Accepted Answer

A) exchange rate. 
B) overnight lending rate. 
C) prime interest rate. 
D) the velocity of money. 
A) exchange rate. 
B) overnight lending rate. 
C) prime interest rate. 
D) the velocity of money.

Exam 15: Part B: Interest Rates and Monetary Policy

The easy money of Japan during the 1990s and early 2000s:

In the Bank of Canada's consolidated balance sheet, the largest asset is:

An expansionary monetary policy is appropriate for the alleviation of domestic:

If the government pursues a restrictive monetary policy, then it will:

Refer to the above diagram for the market for money.The total demand for money is shown by:

In terms of the aggregate demand and aggregate supply model, the sale of government bonds by the Bank of Canada to chartered banks will:

On the liability side of the Bank of Canada's consolidated balance sheet, the three main categories are:

If the dollars held for transactions purposes are, on the average, spent four times a year for final goods and services, then the quantity of money people will wish to hold for transactions is equal to:

If during a certain period the Bank of Canada's policy target was to stabilize the money supply, we would expect:

Refer to the above diagram for the market for money.If each dollar held for transactions purposes is spent four times per year on the average, we can infer that the:

A restrictive monetary policy may not be effective if the investment-demand curve shifts to the left.

The so-called Taylor Rule states that:

Refer to the above market for money diagram.If the interest rate was at 3 percent, people would:

A newspaper headline reads: "Bank of Canada Raises the overnight rate for third time this year." This headline indicates that the Bank of Canada is most likely trying to:

Which of the following is correct?

Which statement is true?

The price of a bond with no expiration date is originally $5,000 and it pays an annual interest payment of $500.If the price of the bond falls to $3,000, then the effective interest rate yield to a new buyer of the bond is:

Restrictive monetary policies are most likely to be used by the central bank when an economy faces:

The purpose of an expansionary monetary policy is to:

The Bank of Canada often communicates its intentions to tighten or loosen monetary policy by announcing a change in targets for:

Part A: Limits, Alternatives, and Choices

Part B: Limits, Alternatives, and Choices

Part A: The Market System and the Circular Flow

Part B: The Market System and the Circular Flow

Part A: Demand, Supply, and Market Equilibrium

Part B: Demand, Supply, and Market Equilibrium

Part A: Market Failures: Public Goods and Externalities

Part B: Market Failures: Public Goods and Externalities

Part A: Governments Role and Government Failure

Part B: Governments Role and Government Failure

Part A: An Introduction to Macroeconomics

Part B: An Introduction to Macroeconomics

Part A: Measuring the Economys Output

Part B: Measuring the Economys Output

Part A: Economic Growth

Part B: Economic Growth

Part A: Business Cycles, Unemployment, and Inflation

Part B: Business Cycles, Unemployment, and Inflation

Part A: Basic Macroeconomic Relationships

Part B: Basic Macroeconomic Relationships

Part A: The Aggregate Expenditures Model

Part B: The Aggregate Expenditures Model

Part A: Aggregate Demand and Aggregate Supply

Part B: Aggregate Demand and Aggregate Supply

Part A: Fiscal Policy, Deficits, Surpluses, and Debt

Part B: Fiscal Policy, Deficits, Surpluses, and Debt

Part A: Money, Banking, and Money Creation

Part B: Money, Banking, and Money Creation

Part A: Interest Rates and Monetary Policy

Part A: Long-Run Macroeconomic Adjustments

Part B: Long-Run Macroeconomic Adjustments

Part A: International Trade

Part B: International Trade

Part C: Financial Economics

Part A: The Balance of Payments and Exchange Rates

Part B: The Balance of Payments and Exchange Rates

The Economics of Developing Countries

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