Question 1

Which statement best explains the role of the Canadian Deposit Insurance Corporation (CDIC)?

Accepted Answer

A)  The CDIC protects depositors in the event of bank failures. 
B)  The CDIC protects commercial banks in the event of mortgage defaults 
C)  The CDIC determines the bank rate. 
D)  The CDIC determines the reserve requirement. 
A)  The CDIC protects depositors in the event of bank failures. 
B)  The CDIC protects commercial banks in the event of mortgage defaults 
C)  The CDIC determines the bank rate. 
D)  The CDIC determines the reserve requirement.

Question 2

What happens in a 100-percent-reserve banking system?

Accepted Answer

A)  Banks can create money by issuing currency. 
B)  Banks can create money by lending out reserves. 
C)  Banks can lend money to their customers. 
D)  Banks hold as many reserves as they hold deposits. 
A)  Banks can create money by issuing currency. 
B)  Banks can create money by lending out reserves. 
C)  Banks can lend money to their customers. 
D)  Banks hold as many reserves as they hold deposits.

Question 3

Which of the following is included in M2 but not in M1+?

Accepted Answer

A)  demand deposits 
B)  corporate bonds 
C)  currency 
D)  term deposits 
A)  demand deposits 
B)  corporate bonds 
C)  currency 
D)  term deposits

Question 4

What is a credit card?

Accepted Answer

A)  a form of money 
B)  a form of saving 
C)  a form of investing 
D)  a form of payment 
A)  a form of money 
B)  a form of saving 
C)  a form of investing 
D)  a form of payment

Question 5

If you deposit $100 into a demand deposit at a bank, what does this action do to the money supply?

Accepted Answer

A)  It increases the money supply by more than $100. 
B)  It increases the money supply by less than $100. 
C)  It decreases the money supply by more than $100. 
D)  It decreases the money supply by less than $100. 
A)  It increases the money supply by more than $100. 
B)  It increases the money supply by less than $100. 
C)  It decreases the money supply by more than $100. 
D)  It decreases the money supply by less than $100.

Question 6

An increase in reserve requirements raises the reserve ratio and decreases the money supply.

Accepted Answer

A) True 
 B)False

Question 7

When a bank loans out $1000, what happens to the money supply in the long term?

Accepted Answer

A)  It increases by $1000. 
B)  It decreases by $1000. 
C)  It increases by more than $1000. 
D)  It decreases by more than $1000. 
A)  It increases by $1000. 
B)  It decreases by $1000. 
C)  It increases by more than $1000. 
D)  It decreases by more than $1000.

Question 8

When the Bank of Canada conducts open-market purchases, how do commercial banks' assets most likely change?

Accepted Answer

A)  Reserves increase, and banks increase lending. 
B)  Reserves increase, and banks decrease lending. 
C)  Reserves decrease, and banks increase lending. 
D)  Reserves decrease, and banks decrease lending. 
A)  Reserves increase, and banks increase lending. 
B)  Reserves increase, and banks decrease lending. 
C)  Reserves decrease, and banks increase lending. 
D)  Reserves decrease, and banks decrease lending.

Question 9

Assume that banks do not hold excess reserves. The banking system has $20 million in reserves and has a reserve requirement of 20 percent. The public holds $10 million in currency. Then the public decides to withdraw $5 million in currency from the banking system. If the Bank of Canada wants to keep the money supply stable by changing the reserve requirement, then what will the new reserve requirement be?

Accepted Answer

A)  16 percent 
B)  18.2 percent 
C)  20 percent 
D)  25 percent 
A)  16 percent 
B)  18.2 percent 
C)  20 percent 
D)  25 percent

Question 10

M2 is both larger and more liquid than M1+.

Accepted Answer

A) True 
 B)False

Question 11

If the reserve ratio decreased from 20 percent to 10 percent, which of the following would happen to the money multiplier?

Accepted Answer

A)  It would rise from 10 to 20. 
B)  It would rise from 5 to 10. 
C)  It would fall from 10 to 5. 
D)  It would fall from 20 to 5. 
A)  It would rise from 10 to 20. 
B)  It would rise from 5 to 10. 
C)  It would fall from 10 to 5. 
D)  It would fall from 20 to 5.

Question 12

Which of the following is included in M1+?

Accepted Answer

A)  government bonds 
B)  demand deposits 
C)  savings deposits 
D)  travellers' cheques 
A)  government bonds 
B)  demand deposits 
C)  savings deposits 
D)  travellers' cheques

Question 13

In a fractional reserve banking system, how does an increase in the reserve requirement change the money multiplier?

Accepted Answer

A)  The money multiplier increases by a higher percentage change than the increase in the reserve ratio. 
B)  The money multiplier decreases by a higher percentage change than the increase in the reserve ratio. 
C)  The money multiplier increases by a lower percentage change than the increase in the reserve ratio. 
D)  The money multiplier decreases by a lower percentage change than the increase in the reserve ratio. 
A)  The money multiplier increases by a higher percentage change than the increase in the reserve ratio. 
B)  The money multiplier decreases by a higher percentage change than the increase in the reserve ratio. 
C)  The money multiplier increases by a lower percentage change than the increase in the reserve ratio. 
D)  The money multiplier decreases by a lower percentage change than the increase in the reserve ratio.

Question 14

If the reserve ratio is 15 percent, by how much will an additional $1000 of reserves increase the money supply?

Accepted Answer

A)  $1176 
B)  $1275 
C)  $5667 
D)  $6667 
A)  $1176 
B)  $1275 
C)  $5667 
D)  $6667

Question 15

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 25 percent, what happens to the money supply in the very short term?

Accepted Answer

A)  It decreases by $100. 
B)  It increases by $25. 
C)  It decreases by $25. 
D)  It increases by $100. 
A)  It decreases by $100. 
B)  It increases by $25. 
C)  It decreases by $25. 
D)  It increases by $100.

Question 16

Which statement best describes the consequences of open-market sales 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)  Bank reserves decrease, and the money supply increases. 
D)  Bank reserves decrease, and the money supply decreases. 
A)  Bank reserves increase, and the money supply increases. 
B)  Bank reserves increase, and the money supply decreases. 
C)  Bank reserves decrease, and the money supply increases. 
D)  Bank reserves decrease, and the money supply decreases.

Question 17

How can the Bank of Canada directly protect a bank during a bank run?

Accepted Answer

A)  by increasing reserve requirements 
B)  by selling government bonds to the bank 
C)  by lending reserves to the bank 
D)  by increasing the overnight rate 
A)  by increasing reserve requirements 
B)  by selling government bonds to the bank 
C)  by lending reserves to the bank 
D)  by increasing the overnight rate

Question 18

Suppose the public decides to hold more currency and fewer deposits in banks. Which statement describes the effects of this decision?

Accepted Answer

A)  Bank reserves decrease, and the money supply eventually decreases. 
B)  Bank reserves decrease, but the money supply does not change. 
C)  Bank reserves increase, and the money supply eventually increases. 
D)  Bank reserves increase, but the money supply does not change. 
A)  Bank reserves decrease, and the money supply eventually decreases. 
B)  Bank reserves decrease, but the money supply does not change. 
C)  Bank reserves increase, and the money supply eventually increases. 
D)  Bank reserves increase, but the money supply does not change.

Question 19

Ralph deposits half of his inheritance in a savings account at the bank. In doing so, Ralph is using money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 20

Are credit cards and debit cards money? What's the difference between credit and debit cards?

Accepted Answer

Neither credit cards nor debit cards are

Which statement best explains the role of the Canadian Deposit Insurance Corporation (CDIC)?

What happens in a 100-percent-reserve banking system?

Which of the following is included in M2 but not in M1+?

What is a credit card?

If you deposit $100 into a demand deposit at a bank, what does this action do to the money supply?

An increase in reserve requirements raises the reserve ratio and decreases the money supply.

When a bank loans out $1000, what happens to the money supply in the long term?

When the Bank of Canada conducts open-market purchases, how do commercial banks' assets most likely change?

M2 is both larger and more liquid than M1+.

If the reserve ratio decreased from 20 percent to 10 percent, which of the following would happen to the money multiplier?

Which of the following is included in M1+?

In a fractional reserve banking system, how does an increase in the reserve requirement change the money multiplier?

If the reserve ratio is 15 percent, by how much will an additional $1000 of reserves increase the money supply?

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 25 percent, what happens to the money supply in the very short term?

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

How can the Bank of Canada directly protect a bank during a bank run?

Suppose the public decides to hold more currency and fewer deposits in banks. Which statement describes the effects of this decision?

Ralph deposits half of his inheritance in a savings account at the bank. In doing so, Ralph is using money as a medium of exchange.

Are credit cards and debit cards money? What's the difference between credit and debit cards?

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

Which statement best explains the role of the Canadian Deposit Insurance Corporation (CDIC)?

What happens in a 100-percent-reserve banking system?

Which of the following is included in M2 but not in M1+?

What is a credit card?

If you deposit $100 into a demand deposit at a bank, what does this action do to the money supply?

An increase in reserve requirements raises the reserve ratio and decreases the money supply.

When a bank loans out $1000, what happens to the money supply in the long term?

When the Bank of Canada conducts open-market purchases, how do commercial banks' assets most likely change?

M2 is both larger and more liquid than M1+.

If the reserve ratio decreased from 20 percent to 10 percent, which of the following would happen to the money multiplier?

Which of the following is included in M1+?

In a fractional reserve banking system, how does an increase in the reserve requirement change the money multiplier?

If the reserve ratio is 15 percent, by how much will an additional $1000 of reserves increase the money supply?

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 25 percent, what happens to the money supply in the very short term?

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

How can the Bank of Canada directly protect a bank during a bank run?

Suppose the public decides to hold more currency and fewer deposits in banks. Which statement describes the effects of this decision?

Ralph deposits half of his inheritance in a savings account at the bank. In doing so, Ralph is using money as a medium of exchange.

Are credit cards and debit cards money? What's the difference between credit and debit cards?

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