Question 1

The use of money allows trade to be roundabout.

Accepted Answer

A) True 
 B)False

Question 2

What characterizes commodity money?

Accepted Answer

A)  It is money that is backed by gold. 
B)  It is the principal type of money in use today. 
C)  It is money with intrinsic value. 
D)  It is comprised of receipts created in international trade that are used as a medium of exchange. 
A)  It is money that is backed by gold. 
B)  It is the principal type of money in use today. 
C)  It is money with intrinsic value. 
D)  It is comprised of receipts created in international trade that are used as a medium of exchange.

Question 3

-Refer to the Table 10-2. If the reserve requirement is 30 percent, what is this bank's reserve position?

Accepted Answer

A)  It has $29,000 of excess reserves. 
B)  It needs $10,000 more in reserves to meet its reserve requirement. 
C)  It needs $27,500 more in reserves to meet its reserve requirement. 
D)  It just meets its reserve requirement. 
A)  It has $29,000 of excess reserves. 
B)  It needs $10,000 more in reserves to meet its reserve requirement. 
C)  It needs $27,500 more in reserves to meet its reserve requirement. 
D)  It just meets its reserve requirement.

Question 4

-Refer to the Table 10-2. If the reserve requirement is 10 percent and then someone deposits $50,000 into the bank, what is the bank's reserve position?

Accepted Answer

A)  It will have $75,000 in excess reserves. 
B)  It will have $52,500 in excess reserves. 
C)  It will need to raise reserves by $5000. 
D)  It will have excess reserves of $2500. 
A)  It will have $75,000 in excess reserves. 
B)  It will have $52,500 in excess reserves. 
C)  It will need to raise reserves by $5000. 
D)  It will have excess reserves of $2500.

Question 5

What does the Bank of Canada NOT do?

Accepted Answer

A)  control the supply of money 
B)  control the value of money 
C)  make loans to individuals 
D)  regulate the banking system 
A)  control the supply of money 
B)  control the value of money 
C)  make loans to individuals 
D)  regulate the banking system

Question 6

What is the reason behind the seven-year appointment for the governor of Bank of Canada?

Accepted Answer

A)  It makes the system compatible with the ones in other countries. 
B)  It confers stability to the financial system. 
C)  It allows the governor time to implement changes and to analyze the results of those changes. 
D)  It insulates the governor from political pressure. 
A)  It makes the system compatible with the ones in other countries. 
B)  It confers stability to the financial system. 
C)  It allows the governor time to implement changes and to analyze the results of those changes. 
D)  It insulates the governor from political pressure.

Question 7

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

Accepted Answer

A)  Bank reserves increase, and the money supply increases. 
B)  Bank reserves increase, and the money supply decreases. 
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)  Bank reserves increase, and the money supply increases. 
B)  Bank reserves increase, and the money supply decreases. 
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 8

The money multiplier equals 1 divided by (1 - the reserve ratio).

Accepted Answer

A) True 
 B)False

Question 9

In Wellville, the money supply is $80,000 and reserves are $12,800. Assuming that people hold only deposits and no currency, and that banks hold only required reserves, what is the required reserve ratio?

Accepted Answer

A)  12 percent 
B)  14.5 percent 
C)  16 percent 
D)  29 percent 
A)  12 percent 
B)  14.5 percent 
C)  16 percent 
D)  29 percent

Question 10

How does currency contribute to the money supply?

Accepted Answer

A)  Currency held by the public and by banks is part of the money supply. 
B)  Currency held by the public is part of the money supply, but currency held by banks is not. 
C)  Currency held by the public is not part of the money supply, but currency held by banks is. 
D)  Currency held by the public or banks is not part of the money supply since it is not included in M1. 
A)  Currency held by the public and by banks is part of the money supply. 
B)  Currency held by the public is part of the money supply, but currency held by banks is not. 
C)  Currency held by the public is not part of the money supply, but currency held by banks is. 
D)  Currency held by the public or banks is not part of the money supply since it is not included in M1.

Question 11

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

Accepted Answer

A)  The Bank of Canada sells Treasury bills, which increases the money supply. 
B)  The Bank of Canada sells 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 sells Treasury bills, which increases the money supply. 
B)  The Bank of Canada sells 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

Which statement best illustrates the unit of account function of money?

Accepted Answer

A)  You list prices for candy sold on your website, www.sweettooth.com, in dollars. 
B)  You pay for your NHL tickets with dollars. 
C)  You keep $10 in your backpack for emergencies. 
D)  You sell a used copy of your textbook for $40. 
A)  You list prices for candy sold on your website, www.sweettooth.com, in dollars. 
B)  You pay for your NHL tickets with dollars. 
C)  You keep $10 in your backpack for emergencies. 
D)  You sell a used copy of your textbook for $40.

Question 13

If a central bank wanted to increase the money supply, what would it most likely do?

Accepted Answer

A)  It would make open-market purchases and lower the bank rate. 
B)  It would make open-market sales and lower the bank rate. 
C)  It would make open-market purchases and raise the bank rate. 
D)  It would make open-market sales and raise the bank rate. 
A)  It would make open-market purchases and lower the bank rate. 
B)  It would make open-market sales and lower the bank rate. 
C)  It would make open-market purchases and raise the bank rate. 
D)  It would make open-market sales and raise the bank rate.

Question 14

M1+ includes savings deposits.

Accepted Answer

A) True 
 B)False

Question 15

In an economy that relies on barter, trade requires a double coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 16

In the nineteenth century, when there were often bank runs caused by crop failures, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, which action should the banks have taken?

Accepted Answer

A)  They should have increased both the money multiplier and the money supply. 
B)  They should have decreased the money multiplier and increased the money supply. 
C)  They should have increased the money multiplier and decreased the money supply. 
D)  They should have decreased both the money multiplier and the money supply. 
A)  They should have increased both the money multiplier and the money supply. 
B)  They should have decreased the money multiplier and increased the money supply. 
C)  They should have increased the money multiplier and decreased the money supply. 
D)  They should have decreased both the money multiplier and the money supply.

Question 17

If the reserve ratio is 20 percent, how much is the money multiplier?

Accepted Answer

A)  2 
B)  4 
C)  5 
D)  8 
A)  2 
B)  4 
C)  5 
D)  8

Question 18

What is a role of the Minister of Finance with respect to the Bank of Canada or the banking system?

Accepted Answer

A)  to control all activities of the Bank of Canada 
B)  to issue the governor of the Bank of Canada a written directive to resign 
C)  to issue currency 
D)  to maintain the stability of the banking system 
A)  to control all activities of the Bank of Canada 
B)  to issue the governor of the Bank of Canada a written directive to resign 
C)  to issue currency 
D)  to maintain the stability of the banking system

Question 19

What is meant by the term "lender of last resort"? In what circumstances might the Bank of Canada be a lender of last resort?

Accepted Answer

A lender of last resort is a lender to t

Question 20

Table 10-3
The following information pertains to the Bank of Kamloops. 
 
-Refer to the Table 10-3. If the Bank of Kamloops has loaned out all the money it wants, given its deposits, what is its reserve ratio?

Accepted Answer

A)  1 percent 
B)  5 percent 
C)  10 percent 
D)  15 percent 
A)  1 percent 
B)  5 percent 
C)  10 percent 
D)  15 percent

The use of money allows trade to be roundabout.

What characterizes commodity money?

-Refer to the Table 10-2. If the reserve requirement is 30 percent, what is this bank's reserve position?

-Refer to the Table 10-2. If the reserve requirement is 10 percent and then someone deposits $50,000 into the bank, what is the bank's reserve position?

What does the Bank of Canada NOT do?

What is the reason behind the seven-year appointment for the governor of Bank of Canada?

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

The money multiplier equals 1 divided by (1 - the reserve ratio).

In Wellville, the money supply is $80,000 and reserves are $12,800. Assuming that people hold only deposits and no currency, and that banks hold only required reserves, what is the required reserve ratio?

How does currency contribute to the money supply?

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

Which statement best illustrates the unit of account function of money?

If a central bank wanted to increase the money supply, what would it most likely do?

M1+ includes savings deposits.

In an economy that relies on barter, trade requires a double coincidence of wants.

In the nineteenth century, when there were often bank runs caused by crop failures, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, which action should the banks have taken?

If the reserve ratio is 20 percent, how much is the money multiplier?

What is a role of the Minister of Finance with respect to the Bank of Canada or the banking system?

What is meant by the term "lender of last resort"? In what circumstances might the Bank of Canada be a lender of last resort?

Table 10-3 The following information pertains to the Bank of Kamloops. -Refer to the Table 10-3. If the Bank of Kamloops has loaned out all the money it wants, given its deposits, what is its reserve ratio?

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

The use of money allows trade to be roundabout.

What characterizes commodity money?

-Refer to the Table 10-2. If the reserve requirement is 30 percent, what is this bank's reserve position?

-Refer to the Table 10-2. If the reserve requirement is 10 percent and then someone deposits $50,000 into the bank, what is the bank's reserve position?

What does the Bank of Canada NOT do?

What is the reason behind the seven-year appointment for the governor of Bank of Canada?

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

The money multiplier equals 1 divided by (1 - the reserve ratio).

In Wellville, the money supply is $80,000 and reserves are $12,800. Assuming that people hold only deposits and no currency, and that banks hold only required reserves, what is the required reserve ratio?

How does currency contribute to the money supply?

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

Which statement best illustrates the unit of account function of money?

If a central bank wanted to increase the money supply, what would it most likely do?

M1+ includes savings deposits.

In an economy that relies on barter, trade requires a double coincidence of wants.

In the nineteenth century, when there were often bank runs caused by crop failures, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, which action should the banks have taken?

If the reserve ratio is 20 percent, how much is the money multiplier?

What is a role of the Minister of Finance with respect to the Bank of Canada or the banking system?

What is meant by the term "lender of last resort"? In what circumstances might the Bank of Canada be a lender of last resort?

Table 10-3 The following information pertains to the Bank of Kamloops. -Refer to the Table 10-3. If the Bank of Kamloops has loaned out all the money it wants, given its deposits, what is its reserve ratio?

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