Question 1

What is the difference between commodity money and fiat money? Why do people accept fiat currency in trade for goods and services?

Accepted Answer

Commodity money has "intrinsic value," o

Question 2

What is a bank's capital?

Accepted Answer

A)  the bank's reserves 
B)  the bank's deposits 
C)  the bank's debt 
D)  the bank's equity 
A)  the bank's reserves 
B)  the bank's deposits 
C)  the bank's debt 
D)  the bank's equity

Question 3

At one time, the country of Freedonia had no banks, but had currency of $40 million. Then a banking system was established with a reserve requirement of one-third. The people of Freedonia 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 Freedonia now hold?

Accepted Answer

A)  $13.33 million 
B)  $20 million 
C)  $33.34 million 
D)  $36.36 million 
A)  $13.33 million 
B)  $20 million 
C)  $33.34 million 
D)  $36.36 million

Question 4

-Refer to the Table 10-2. If the Last Bank of Panorama Springs is holding $4000 in excess reserves, what is the reserve requirement?

Accepted Answer

A)  8 percent 
B)  9 percent 
C)  10 percent 
D)  12 percent 
A)  8 percent 
B)  9 percent 
C)  10 percent 
D)  12 percent

Question 5

What is the role of the Bank of Canada?

Accepted Answer

A)  to lend money to large companies 
B)  to make monetary policy 
C)  to raise taxes 
D)  to oversee government spending 
A)  to lend money to large companies 
B)  to make monetary policy 
C)  to raise taxes 
D)  to oversee government spending

Question 6

Table 10-3
The following information pertains to the Bank of Kamloops. 
 
-Refer to the Table 10-3. If the Bank of Canada requires banks to hold 5 percent of deposits as reserves, how much in excess reserves does the Bank of Kamloops now hold?

Accepted Answer

A)  $5 
B)  $25 
C)  $60 
D)  $65 
A)  $5 
B)  $25 
C)  $60 
D)  $65

Question 7

What characterizes fiat money?

Accepted Answer

A)  It has no intrinsic value. 
B)  It is backed by gold. 
C)  It has intrinsic value equal to its value in exchange. 
D)  It is an illiquid asset. 
A)  It has no intrinsic value. 
B)  It is backed by gold. 
C)  It has intrinsic value equal to its value in exchange. 
D)  It is an illiquid asset.

Question 8

During wars, the public tends to hold relatively more currency and relatively fewer deposits. Which statement best describes the effects of this increase in currency holdings?

Accepted Answer

A)  Reserves would decrease, and the money supply would increase. 
B)  Reserves and the money supply would decrease. 
C)  Reserves would increase, but the money supply would be unchanged. 
D)  Reserves would decrease, but the money supply would be unchanged. 
A)  Reserves would decrease, and the money supply would increase. 
B)  Reserves and the money supply would decrease. 
C)  Reserves would increase, but the money supply would be unchanged. 
D)  Reserves would decrease, but the money supply would be unchanged.

Question 9

Which statement best illustrates the medium of exchange function of money?

Accepted Answer

A)  You keep some money hidden in your shoe. 
B)  Your recent tax assessment has valued your condo at $200,000.. 
C)  You pay for your double latte using currency. 
D)  You lend $25 to your friend. 
A)  You keep some money hidden in your shoe. 
B)  Your recent tax assessment has valued your condo at $200,000.. 
C)  You pay for your double latte using currency. 
D)  You lend $25 to your friend.

Question 10

Which statement best defines barter?

Accepted Answer

A)  It is an exchange of goods for money. 
B)  It is an exchange of money for foreign currency. 
C)  It is a generally accepted legal tender. 
D)  It is a transaction that requires a double coincidence of wants. 
A)  It is an exchange of goods for money. 
B)  It is an exchange of money for foreign currency. 
C)  It is a generally accepted legal tender. 
D)  It is a transaction that requires a double coincidence of wants.

Question 11

During recessions, banks typically choose to hold more excess reserves relative to their deposits. Which statement best describes the effects of the increase in reserves?

Accepted Answer

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

Question 12

The money supply of Hooba is $10,000 under a 100 percent reserve banking system. If Hooba decreases the reserve requirement to 10 percent, the money supply could increase by no more than $9000.

Accepted Answer

A) True 
 B)False

Question 13

Which statement best characterizes credit cards?

Accepted Answer

A)  They are a payment form of money. 
B)  They are part of the M1+ money supply. 
C)  They are a method of deferring payment. 
D)  They are a unit of account. 
A)  They are a payment form of money. 
B)  They are part of the M1+ money supply. 
C)  They are a method of deferring payment. 
D)  They are a unit of account.

Question 14

What does the calculated amount of currency per person in Canada suggest?

Accepted Answer

A)  People tend to hold too much currency. 
B)  Most payments are made in cash. 
C)  People do not trust banks. 
D)  There is a significant illegal activity. 
A)  People tend to hold too much currency. 
B)  Most payments are made in cash. 
C)  People do not trust banks. 
D)  There is a significant illegal activity.

Question 15

Who appoints the members of the Board of Directors at the Bank of Canada?

Accepted Answer

A)  the Governor General 
B)  the Minister of Finance 
C)  the Director of the IMF 
D)  the Prime Minister 
A)  the Governor General 
B)  the Minister of Finance 
C)  the Director of the IMF 
D)  the Prime Minister

Question 16

Which account balance is included in M1+?

Accepted Answer

A)  a chequing account 
B)  a credit card account 
C)  a term savings account 
D)  a stock investment 
A)  a chequing account 
B)  a credit card account 
C)  a term savings account 
D)  a stock investment

Question 17

Which of the following ranks assets from most to least liquid?

Accepted Answer

A)  currency, diamonds, stocks 
B)  currency, stocks, diamonds 
C)  diamonds, currency, stocks 
D)  diamonds, stocks, currency 
A)  currency, diamonds, stocks 
B)  currency, stocks, diamonds 
C)  diamonds, currency, stocks 
D)  diamonds, stocks, currency

Question 18

Which statement best explains the role of the Bank of Canada?

Accepted Answer

A)  It maintains a target exchange rate. 
B)  It determines the bank rate. 
C)  It makes loans to large corporations. 
D)  It controls the government budget deficit. 
A)  It maintains a target exchange rate. 
B)  It determines the bank rate. 
C)  It makes loans to large corporations. 
D)  It controls the government budget deficit.

Question 19

Suppose the reserve ratio is 4 percent, banks do not hold excess reserves, people do not hold currency, and the Bank of Canada purchases $25 million of government bonds. Which statement best describes the effects of Bank of Canada's purchase?

Accepted Answer

A)  Bank reserves increase by $25 million, and the money supply eventually increases by $500 million. 
B)  Bank reserves decrease by $25 million, and the money supply eventually increases by $500 million. 
C)  Bank reserves increase by $25 million, and the money supply eventually decreases by $500 million. 
D)  Bank reserves decrease by $25 million, and the money supply eventually decreases by $500 million. 
A)  Bank reserves increase by $25 million, and the money supply eventually increases by $500 million. 
B)  Bank reserves decrease by $25 million, and the money supply eventually increases by $500 million. 
C)  Bank reserves increase by $25 million, and the money supply eventually decreases by $500 million. 
D)  Bank reserves decrease by $25 million, and the money supply eventually decreases by $500 million.

Question 20

Who determines the amount of money in the economy?

Accepted Answer

A)  The Bank of Canada controls the money supply precisely. 
B)  The amount of money in the economy does not depend on the behaviour of depositors. 
C)  The amount of money in the economy depends in part on the behaviour of banks. 
D)  The Minister of Finance determines the amount of money in the economy by law. 
A)  The Bank of Canada controls the money supply precisely. 
B)  The amount of money in the economy does not depend on the behaviour of depositors. 
C)  The amount of money in the economy depends in part on the behaviour of banks. 
D)  The Minister of Finance determines the amount of money in the economy by law.

What is the difference between commodity money and fiat money? Why do people accept fiat currency in trade for goods and services?

What is a bank's capital?

-Refer to the Table 10-2. If the Last Bank of Panorama Springs is holding $4000 in excess reserves, what is the reserve requirement?

What is the role of the Bank of Canada?

Table 10-3 The following information pertains to the Bank of Kamloops. -Refer to the Table 10-3. If the Bank of Canada requires banks to hold 5 percent of deposits as reserves, how much in excess reserves does the Bank of Kamloops now hold?

What characterizes fiat money?

During wars, the public tends to hold relatively more currency and relatively fewer deposits. Which statement best describes the effects of this increase in currency holdings?

Which statement best illustrates the medium of exchange function of money?

Which statement best defines barter?

During recessions, banks typically choose to hold more excess reserves relative to their deposits. Which statement best describes the effects of the increase in reserves?

The money supply of Hooba is $10,000 under a 100 percent reserve banking system. If Hooba decreases the reserve requirement to 10 percent, the money supply could increase by no more than $9000.

Which statement best characterizes credit cards?

What does the calculated amount of currency per person in Canada suggest?

Who appoints the members of the Board of Directors at the Bank of Canada?

Which account balance is included in M1+?

Which of the following ranks assets from most to least liquid?

Which statement best explains the role of the Bank of Canada?

Suppose the reserve ratio is 4 percent, banks do not hold excess reserves, people do not hold currency, and the Bank of Canada purchases $25 million of government bonds. Which statement best describes the effects of Bank of Canada's purchase?

Who determines the amount of money in the economy?

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

What is the difference between commodity money and fiat money? Why do people accept fiat currency in trade for goods and services?

What is a bank's capital?

-Refer to the Table 10-2. If the Last Bank of Panorama Springs is holding $4000 in excess reserves, what is the reserve requirement?

What is the role of the Bank of Canada?

Table 10-3 The following information pertains to the Bank of Kamloops. -Refer to the Table 10-3. If the Bank of Canada requires banks to hold 5 percent of deposits as reserves, how much in excess reserves does the Bank of Kamloops now hold?

What characterizes fiat money?

During wars, the public tends to hold relatively more currency and relatively fewer deposits. Which statement best describes the effects of this increase in currency holdings?

Which statement best illustrates the medium of exchange function of money?

Which statement best defines barter?

During recessions, banks typically choose to hold more excess reserves relative to their deposits. Which statement best describes the effects of the increase in reserves?

The money supply of Hooba is $10,000 under a 100 percent reserve banking system. If Hooba decreases the reserve requirement to 10 percent, the money supply could increase by no more than $9000.

Which statement best characterizes credit cards?

What does the calculated amount of currency per person in Canada suggest?

Who appoints the members of the Board of Directors at the Bank of Canada?

Which account balance is included in M1+?

Which of the following ranks assets from most to least liquid?

Which statement best explains the role of the Bank of Canada?

Suppose the reserve ratio is 4 percent, banks do not hold excess reserves, people do not hold currency, and the Bank of Canada purchases $25 million of government bonds. Which statement best describes the effects of Bank of Canada's purchase?

Who determines the amount of money in the economy?

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