Question 1

How can the Bank of Canada increase the money supply?

Accepted Answer

A)  by conducting open-market sales and raising the bank rate 
B)  by conducting open-market sales and lowering the bank rate 
C)  by conducting open-market purchases and raising the bank rate 
D)  by conducting open-market purchases and lowering the bank rate 
A)  by conducting open-market sales and raising the bank rate 
B)  by conducting open-market sales and lowering the bank rate 
C)  by conducting open-market purchases and raising the bank rate 
D)  by conducting open-market purchases and lowering the bank rate D

Question 2

Why was changing of reserve requirements phased out as a tool used by the Bank of Canada to control the money supply?

Accepted Answer

A)  to make the rules the same for all financial institutions since only credit unions were required to hold reserves 
B)  to make the rules the same for all financial institutions since only commercial banks were required to hold reserves 
C)  because Canada was the only country still imposing reserve requirements on its financial institutions 
D)  because the Bank of Canada was using it too frequently, causing disruption in the banks 
A)  to make the rules the same for all financial institutions since only credit unions were required to hold reserves 
B)  to make the rules the same for all financial institutions since only commercial banks were required to hold reserves 
C)  because Canada was the only country still imposing reserve requirements on its financial institutions 
D)  because the Bank of Canada was using it too frequently, causing disruption in the banks B

Question 3

-Refer to the Table 10-1. If $1000 is deposited into the First Bank of Dawson City, what will happen?

Accepted Answer

A)  Reserves will decrease by $800. 
B)  Liabilities will decrease by $1000. 
C)  Assets will increase by $1000. 
D)  Reserves will increase by $800. 
A)  Reserves will decrease by $800. 
B)  Liabilities will decrease by $1000. 
C)  Assets will increase by $1000. 
D)  Reserves will increase by $800. C

Question 4

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

Accepted Answer

A)  $1200 
B)  $1400 
C)  $2880 
D)  $3000 
A)  $1200 
B)  $1400 
C)  $2880 
D)  $3000

Question 5

What is a characteristic of paper money?

Accepted Answer

A)  It has a high intrinsic value. 
B)  Ithinders efficient allocation of resources. 
C)  It is valuable because it is generally accepted in trade. 
D)  It is valuable only because of the legal tender requirement. 
A)  It has a high intrinsic value. 
B)  Ithinders efficient allocation of resources. 
C)  It is valuable because it is generally accepted in trade. 
D)  It is valuable only because of the legal tender requirement.

Question 6

Which list contains only actions that decrease 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 7

Which statement best describes bank runs today?

Accepted Answer

A)  Bank runs are uncommon because of the high required reserve ratio. 
B)  Bank runs are uncommon because of CDIC deposit insurance. 
C)  Bank runs are common because of the low required reserve ratio. 
D)  Bank runs are common because the CDIC is inefficient. 
A)  Bank runs are uncommon because of the high required reserve ratio. 
B)  Bank runs are uncommon because of CDIC deposit insurance. 
C)  Bank runs are common because of the low required reserve ratio. 
D)  Bank runs are common because the CDIC is inefficient.

Question 8

Suppose that the reserve ratio is 9 percent and that a bank has $2000 in deposits. What are its required reserves?

Accepted Answer

A)  $100 
B)  $120 
C)  $140 
D)  $180 
A)  $100 
B)  $120 
C)  $140 
D)  $180

Question 9

What is the role of money in an economy?

Accepted Answer

A)  Money serves as a person's wealth. 
B)  Money allows people to save 
C)  Money is an investment asset. 
D)  Money allows greater specialization. 
A)  Money serves as a person's wealth. 
B)  Money allows people to save 
C)  Money is an investment asset. 
D)  Money allows greater specialization.

Question 10

Which list contains only actions that decrease the money supply?

Accepted Answer

A)  lowering the bank rate; raising the reserve requirement ratio 
B)  lowering the bank rate; lowering the reserve requirement ratio 
C)  raising the bank rate; raising the reserve requirement ratio 
D)  raising the bank rate; lowering the reserve requirement ratio 
A)  lowering the bank rate; raising the reserve requirement ratio 
B)  lowering the bank rate; lowering the reserve requirement ratio 
C)  raising the bank rate; raising the reserve requirement ratio 
D)  raising the bank rate; lowering the reserve requirement ratio

Question 11

Which statement best describes the process of open-market purchases conducted by the Bank of Canada?

Accepted Answer

A)  The Bank of Canada buys Treasury bills, which increases the money supply. 
B)  The Bank of Canada buys Treasury bills, which decreases the money supply. 
C)  The Bank of Canada borrows from member banks, which increases the money supply. 
D)  The Bank of Canada lends money to member banks, which decreases the money supply. 
A)  The Bank of Canada buys Treasury bills, which increases the money supply. 
B)  The Bank of Canada buys Treasury bills, which decreases the money supply. 
C)  The Bank of Canada borrows from member banks, which increases the money supply. 
D)  The Bank of Canada lends money to member banks, which decreases the money supply.

Question 12

As the reserve ratio increases, what happens to the money multiplier and money supply?

Accepted Answer

A)  The money multiplier increases, but the money supply does not change. 
B)  The money multiplier does not change, but the money supply increases. 
C)  The money multiplier and the money supply both increase. 
D)  The money multiplier and the money supply both decrease. 
A)  The money multiplier increases, but the money supply does not change. 
B)  The money multiplier does not change, but the money supply increases. 
C)  The money multiplier and the money supply both increase. 
D)  The money multiplier and the money supply both decrease.

Question 13

If the reserve ratio is 10 percent, how much is the money multiplier?

Accepted Answer

A)  1/10 
B)  9/10 
C)  10 
D)  100 
A)  1/10 
B)  9/10 
C)  10 
D)  100

Question 14

If the reserve ratio is 20 percent, how much money can be created from $100 of reserves? Show your work.

Accepted Answer

(1/0.20)×

Question 15

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 16

-Refer to the Table 10-1. If $400 is deposited into the First Bank of Dawson City, what will happen?

Accepted Answer

A)  The bank will be able to make additional loans totalling $400. 
B)  Excess reserves initially increase by $400. 
C)  Required reserves initially increase by $8000. 
D)  Excess reserves initially increase by $340. 
A)  The bank will be able to make additional loans totalling $400. 
B)  Excess reserves initially increase by $400. 
C)  Required reserves initially increase by $8000. 
D)  Excess reserves initially increase by $340.

Question 17

If you deposit $5000 into First Hawkeye Bank, what will the bank most likely do?

Accepted Answer

A)  It will eventually increase its required reserves by the reserve ratio times $5000. 
B)  It will be able to lend out $5000 times the reserve ratio. 
C)  It will initially see reserves increase by $5000 divided by the reserve ratio. 
D)  It will be able to lend out $5000. 
A)  It will eventually increase its required reserves by the reserve ratio times $5000. 
B)  It will be able to lend out $5000 times the reserve ratio. 
C)  It will initially see reserves increase by $5000 divided by the reserve ratio. 
D)  It will be able to lend out $5000.

Question 18

For how long is the governor of the Bank of Canada appointed?

Accepted Answer

A)  a two-year term 
B)  a five-year term 
C)  a seven-year term 
D)  a life term 
A)  a two-year term 
B)  a five-year term 
C)  a seven-year term 
D)  a life term

Question 19

Economists argue that the move from barter to money increased trade and production. How is this possible?

Accepted Answer

The use of money allows people

Question 20

Suppose the banking system has $10 million in reserves and the reserve ratio is 25 percent. Then bankers decide to decrease the reserve ratio to 20 percent. How does this decision eventually change the money supply?

Accepted Answer

A)  increases by $0.5 million 
B)  increases by $5 million 
C)  increases by $10 million 
D)  increases by $20 million 
A)  increases by $0.5 million 
B)  increases by $5 million 
C)  increases by $10 million 
D)  increases by $20 million

How can the Bank of Canada increase the money supply?

Why was changing of reserve requirements phased out as a tool used by the Bank of Canada to control the money supply?

-Refer to the Table 10-1. If $1000 is deposited into the First Bank of Dawson City, what will happen?

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

What is a characteristic of paper money?

Which list contains only actions that decrease the money supply?

Which statement best describes bank runs today?

Suppose that the reserve ratio is 9 percent and that a bank has $2000 in deposits. What are its required reserves?

What is the role of money in an economy?

Which list contains only actions that decrease the money supply?

Which statement best describes the process of open-market purchases conducted by the Bank of Canada?

As the reserve ratio increases, what happens to the money multiplier and money supply?

If the reserve ratio is 10 percent, how much is the money multiplier?

If the reserve ratio is 20 percent, how much money can be created from $100 of reserves? Show your work.

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.

-Refer to the Table 10-1. If $400 is deposited into the First Bank of Dawson City, what will happen?

If you deposit $5000 into First Hawkeye Bank, what will the bank most likely do?

For how long is the governor of the Bank of Canada appointed?

Economists argue that the move from barter to money increased trade and production. How is this possible?

Suppose the banking system has $10 million in reserves and the reserve ratio is 25 percent. Then bankers decide to decrease the reserve ratio to 20 percent. How does this decision eventually change the money supply?

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 and 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

How can the Bank of Canada increase the money supply?

Why was changing of reserve requirements phased out as a tool used by the Bank of Canada to control the money supply?

-Refer to the Table 10-1. If $1000 is deposited into the First Bank of Dawson City, what will happen?

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

What is a characteristic of paper money?

Which list contains only actions that decrease the money supply?

Which statement best describes bank runs today?

Suppose that the reserve ratio is 9 percent and that a bank has $2000 in deposits. What are its required reserves?

What is the role of money in an economy?

Which list contains only actions that decrease the money supply?

Which statement best describes the process of open-market purchases conducted by the Bank of Canada?

As the reserve ratio increases, what happens to the money multiplier and money supply?

If the reserve ratio is 10 percent, how much is the money multiplier?

If the reserve ratio is 20 percent, how much money can be created from $100 of reserves? Show your work.

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.

-Refer to the Table 10-1. If $400 is deposited into the First Bank of Dawson City, what will happen?

If you deposit $5000 into First Hawkeye Bank, what will the bank most likely do?

For how long is the governor of the Bank of Canada appointed?

Economists argue that the move from barter to money increased trade and production. How is this possible?

Suppose the banking system has $10 million in reserves and the reserve ratio is 25 percent. Then bankers decide to decrease the reserve ratio to 20 percent. How does this decision eventually change the money supply?

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 and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters