Exam 4: The Monetary System: What It Is and How It Works

Banks create money in:

In a 100-percent-reserve banking system, banks:

The money supply will decrease if the:

Demand deposits are funds held in:

If the monetary base equals $400 billion and the money multiplier equals 2, then the money supply equals:

To increase the monetary base, the Bank of Canada can:

In a system with 100-percent-reserve banking:

Open-market operations are:

The preferences of households determine the:

Why does the Bank of Canada not have complete control over the size of the money supply? Give at least two reasons.

The currency-deposit ratio is determined by:

Construct a bank balance sheet with the following items: reserves, deposits, loans, securities, capital, and debt. Choose values so that the reserve-deposit ratio is 10 percent and the leverage ratio is 10. Give an example of a change in asset values that would push bank capital to zero. What happens when bank capital is gone?

When the Bank of Canada decreases the interest rate paid on reserves, it:

If the reserve-deposit ratio is less than one, and the monetary base increases by $1 million, then the money supply will:

In a fractional-reserve banking system, banks create money when they:

Money market mutual fund shares are included in:

Between August 1929 and March 1933, the U.S. money supply fell 28 percent. At that time the monetary base _____, and the currency-deposit and reserve-deposit ratios both _____.

Economists use the term money to refer to:

If the Bank of Canada decides to switch some of the Government of Canada's deposits held at the Bank to chartered banks, the money supply will:

If the Bank of Canada increases the interest rate paid on reserves, banks will tend to hold _____ excess reserves, which will _____ the money multiplier.