Question 1

What happened during the Great Depression in the early 1930s?

Accepted Answer

A)  the Great Depression was as bad in Canada as it was in the United States. 
B)  more banks in Canada closed than in the United States 
C)  the money supply rose sharply. 
D)  the value of Canadian exports increased considerably. 
A)  the Great Depression was as bad in Canada as it was in the United States. 
B)  more banks in Canada closed than in the United States 
C)  the money supply rose sharply. 
D)  the value of Canadian exports increased considerably.

Question 2

What is a debit card?

Accepted Answer

A)  a form of money 
B)  a means of payment 
C)  a form of investment 
D)  a means of borrowing 
A)  a form of money 
B)  a means of payment 
C)  a form of investment 
D)  a means of borrowing

Question 3

Who owns the Bank of Canada?

Accepted Answer

A)  private individuals 
B)  the Queen 
C)  the chartered banks 
D)  the federal government of Canada 
A)  private individuals 
B)  the Queen 
C)  the chartered banks 
D)  the federal government of Canada

Question 4

Which list contains only actions that decrease the money supply?

Accepted Answer

A)  raising the bank rate; making open-market purchases 
B)  raising the bank rate; making open-market sales 
C)  lowering the bank rate; making open-market purchases 
D)  lowering the bank rate; making open-market sales 
A)  raising the bank rate; making open-market purchases 
B)  raising the bank rate; making open-market sales 
C)  lowering the bank rate; making open-market purchases 
D)  lowering the bank rate; making open-market sales

Question 5

Which statement best defines the bank rate?

Accepted Answer

A)  It is the interest rate the Bank of Canada charges banks. 
B)  It is one divided by the difference between one and the reserve ratio. 
C)  It is the interest rate banks receive on reserve deposits with Bank of Canada. 
D)  It is the interest rate that banks charge on overnight loans to other banks. 
A)  It is the interest rate the Bank of Canada charges banks. 
B)  It is one divided by the difference between one and the reserve ratio. 
C)  It is the interest rate banks receive on reserve deposits with Bank of Canada. 
D)  It is the interest rate that banks charge on overnight loans to other banks.

Question 6

The Bank of Canada is a privately operated commercial bank.

Accepted Answer

A) True 
 B)False

Question 7

-Refer to the Table 10-2. If the reserve requirement is 12 percent, what is the state of this bank?

Accepted Answer

A)  It can make a new loan of $17,500. 
B)  It has less reserves than required. 
C)  It has excess reserves of less than $5000. 
D)  It has excess reserves of more than $5000. 
A)  It can make a new loan of $17,500. 
B)  It has less reserves than required. 
C)  It has excess reserves of less than $5000. 
D)  It has excess reserves of more than $5000.

Question 8

Suppose a bank has $200,000 in deposits and $150,000 in loans. What is its reserve ratio?

Accepted Answer

A)  1 percent 
B)  5 percent 
C)  10 percent 
D)  25 percent 
A)  1 percent 
B)  5 percent 
C)  10 percent 
D)  25 percent

Question 9

Which of the following is NOT a tool of monetary policy?

Accepted Answer

A)  open-market operations 
B)  reserve requirements 
C)  changing the bank rate 
D)  increasing the tax rate 
A)  open-market operations 
B)  reserve requirements 
C)  changing the bank rate 
D)  increasing the tax rate

Question 10

How could the Bank of Canada increase the money supply?

Accepted Answer

A)  by selling government bonds 
B)  by decreasing the bank rate 
C)  by increasing the reserve requirement 
D)  by increasing the bank rate 
A)  by selling government bonds 
B)  by decreasing the bank rate 
C)  by increasing the reserve requirement 
D)  by increasing the bank rate

Question 11

Which of the following has intrinsic value?

Accepted Answer

A)  a gold coin 
B)  a twenty-dollar bill 
C)  a bank account 
D)  a personal cheque 
A)  a gold coin 
B)  a twenty-dollar bill 
C)  a bank account 
D)  a personal cheque

Question 12

What is the interest rate the Bank of Canada charges on loans it makes to banks?

Accepted Answer

A)  the prime rate 
B)  the federal repayment rate 
C)  the bank rate 
D)  the dividend debt 
A)  the prime rate 
B)  the federal repayment rate 
C)  the bank rate 
D)  the dividend debt

Question 13

How has the Bank of Canada historically viewed changes in reserve requirements to control the money supply?

Accepted Answer

A)  It has been gradually lowering the reserve requirements to keep inflation rates low. 
B)  It has traditionally made frequent changes in order to stabilize the economy. 
C)  It has been reluctant to make frequent changes as this would disrupt the business of banking. 
D)  It has been gradually increasing the reserve requirements to keep inflation rates low. 
A)  It has been gradually lowering the reserve requirements to keep inflation rates low. 
B)  It has traditionally made frequent changes in order to stabilize the economy. 
C)  It has been reluctant to make frequent changes as this would disrupt the business of banking. 
D)  It has been gradually increasing the reserve requirements to keep inflation rates low.

Question 14

When the Bank of Canada decreases the bank rate, banks will borrow more from the Bank of Canada. Which statement best describes the outcomes of this process?

Accepted Answer

A)  Banks lend more to the public, and so the money supply will decrease. 
B)  Banks lend less to the public, and so the money supply will decrease. 
C)  Banks lend more to the public, and so the money supply will increase. 
D)  Banks lend less to the public, and so the money supply will increase. 
A)  Banks lend more to the public, and so the money supply will decrease. 
B)  Banks lend less to the public, and so the money supply will decrease. 
C)  Banks lend more to the public, and so the money supply will increase. 
D)  Banks lend less to the public, and so the money supply will increase.

Question 15

Mia puts money into a piggy bank so she can spend it later. Which function of money does this illustrate?

Accepted Answer

A)  store of value 
B)  medium of exchange 
C)  unit of account 
D)  wealth 
A)  store of value 
B)  medium of exchange 
C)  unit of account 
D)  wealth

Question 16

At one time, the country of Sylvania had no banks, but had currency of $10 million. Then a banking system was established with a reserve requirement of 20 percent. The people of Sylvania now keep half their money in the form of currency and half in the form of bank deposits. If banks do not hold excess reserves, how much currency do the people of Sylvania now hold?

Accepted Answer

A)  $2 million 
B)  $5 million 
C)  $9 million 
D)  $12 million 
A)  $2 million 
B)  $5 million 
C)  $9 million 
D)  $12 million

Question 17

Which list contains only actions that increase 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 18

Table 10-4
The following information pertains to the Bank of Moncton.
 
-Refer to the Table 10-4. Assume that all banks hold the same reserve ratio as the Bank of Moncton. What is the money multiplier?

Accepted Answer

A)  12.5 
B)  15 
C)  17.5 
D)  20 
A)  12.5 
B)  15 
C)  17.5 
D)  20

Question 19

Which statement best describes the outcomes of a decrease in reserve requirements?

Accepted Answer

A)  The reserve ratio decreases, the money multiplier decreases, and the money supply decreases. 
B)  The reserve ratio increases, the money multiplier increases, and the money supply increases. 
C)  The reserve ratio decreases, the money multiplier increases, and the money supply increases. 
D)  The reserve ratio increases, the money multiplier decreases, and the money supply decreases. 
A)  The reserve ratio decreases, the money multiplier decreases, and the money supply decreases. 
B)  The reserve ratio increases, the money multiplier increases, and the money supply increases. 
C)  The reserve ratio decreases, the money multiplier increases, and the money supply increases. 
D)  The reserve ratio increases, the money multiplier decreases, and the money supply decreases.

Question 20

Which statement might explain why Canada has so much currency per person?

Accepted Answer

A)  Canadian citizens are holding a lot of foreign currency. 
B)  Currency may be a preferable store of wealth for criminals. 
C)  People use credit and debit cards more frequently. 
D)  Much of Canadian currency is held by foreigners. 
A)  Canadian citizens are holding a lot of foreign currency. 
B)  Currency may be a preferable store of wealth for criminals. 
C)  People use credit and debit cards more frequently. 
D)  Much of Canadian currency is held by foreigners.

What happened during the Great Depression in the early 1930s?

What is a debit card?

Who owns the Bank of Canada?

Which list contains only actions that decrease the money supply?

Which statement best defines the bank rate?

The Bank of Canada is a privately operated commercial bank.

-Refer to the Table 10-2. If the reserve requirement is 12 percent, what is the state of this bank?

Suppose a bank has $200,000 in deposits and $150,000 in loans. What is its reserve ratio?

Which of the following is NOT a tool of monetary policy?

How could the Bank of Canada increase the money supply?

Which of the following has intrinsic value?

What is the interest rate the Bank of Canada charges on loans it makes to banks?

How has the Bank of Canada historically viewed changes in reserve requirements to control the money supply?

When the Bank of Canada decreases the bank rate, banks will borrow more from the Bank of Canada. Which statement best describes the outcomes of this process?

Mia puts money into a piggy bank so she can spend it later. Which function of money does this illustrate?

Which list contains only actions that increase the money supply?

Table 10-4 The following information pertains to the Bank of Moncton. -Refer to the Table 10-4. Assume that all banks hold the same reserve ratio as the Bank of Moncton. What is the money multiplier?

Which statement best describes the outcomes of a decrease in reserve requirements?

Which statement might explain why Canada has so much currency per person?

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

Exam 10: The Monetary System

What happened during the Great Depression in the early 1930s?

What is a debit card?

Who owns the Bank of Canada?

Which list contains only actions that decrease the money supply?

Which statement best defines the bank rate?

The Bank of Canada is a privately operated commercial bank.

-Refer to the Table 10-2. If the reserve requirement is 12 percent, what is the state of this bank?

Suppose a bank has $200,000 in deposits and $150,000 in loans. What is its reserve ratio?

Which of the following is NOT a tool of monetary policy?

How could the Bank of Canada increase the money supply?

Which of the following has intrinsic value?

What is the interest rate the Bank of Canada charges on loans it makes to banks?

How has the Bank of Canada historically viewed changes in reserve requirements to control the money supply?

When the Bank of Canada decreases the bank rate, banks will borrow more from the Bank of Canada. Which statement best describes the outcomes of this process?

Mia puts money into a piggy bank so she can spend it later. Which function of money does this illustrate?

Which list contains only actions that increase the money supply?

Table 10-4 The following information pertains to the Bank of Moncton. -Refer to the Table 10-4. Assume that all banks hold the same reserve ratio as the Bank of Moncton. What is the money multiplier?

Which statement best describes the outcomes of a decrease in reserve requirements?

Which statement might explain why Canada has so much currency per person?

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