Question 1

Which statement best defines reserve requirements?

Accepted Answer

A)  They are regulations concerning the amount banks are allowed to borrow from the central bank. 
B)  They are regulations concerning the amount of reserves banks must hold against deposits. 
C)  They are regulations concerning reserves banks must hold based on the number and type of loans they make. 
D)  They are regulations concerning the interest rate at which banks can borrow from the central bank. 
A)  They are regulations concerning the amount banks are allowed to borrow from the central bank. 
B)  They are regulations concerning the amount of reserves banks must hold against deposits. 
C)  They are regulations concerning reserves banks must hold based on the number and type of loans they make. 
D)  They are regulations concerning the interest rate at which banks can borrow from the central bank.

Question 2

A bank has (in millions): $200 assets, $140 deposits, and $40 debt. If the bank's assets decrease by 10 percent, by how much does the bank's capital change?

Accepted Answer

A)  It decreases by 100 percent. 
B)  It decreases by 5 percent. 
C)  It increases by 100 percent. 
D)  It increases by 5 percent. 
A)  It decreases by 100 percent. 
B)  It decreases by 5 percent. 
C)  It increases by 100 percent. 
D)  It increases by 5 percent.

Question 3

If the reserve ratio is 100 percent, how much will the money supply eventually increase if there is a deposit of $500 of paper money in a bank?

Accepted Answer

A)  $0- 
B)  $500 
C)  $1000 
D)  $5000 
A)  $0- 
B)  $500 
C)  $1000 
D)  $5000

Question 4

How may the Bank of Canada influence the price level?

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

Question 5

Which statement best defines liquidity?

Accepted Answer

A)  It is the ease with which an asset is converted to the medium of exchange. 
B)  It is a measurement of the intrinsic value of commodity money. 
C)  It is the ability of an asset to retain purchasing power. 
D)  It refers to how many times a dollar changes hands in a given year. 
A)  It is the ease with which an asset is converted to the medium of exchange. 
B)  It is a measurement of the intrinsic value of commodity money. 
C)  It is the ability of an asset to retain purchasing power. 
D)  It refers to how many times a dollar changes hands in a given year.

Question 6

Suppose that the reserve ratio is 7 percent and that a bank has $3000 in deposits. What are its required reserves?

Accepted Answer

A)  $50 
B)  $210 
C)  $510 
D)  $1200 
A)  $50 
B)  $210 
C)  $510 
D)  $1200

Question 7

Suppose a bank has a 6 percent reserve ratio, $4000 in deposits, and it loans out all it can, given the reserve ratio. Which of the following describes the bank's assets?

Accepted Answer

A)  It has $800 in reserves and $16,000 in loans. 
B)  It has $240 in reserves and $3760 in loans. 
C)  It has $240in reserves and $4000 in loans. 
D)  It has $800 in reserves and $3200 in loans. 
A)  It has $800 in reserves and $16,000 in loans. 
B)  It has $240 in reserves and $3760 in loans. 
C)  It has $240in reserves and $4000 in loans. 
D)  It has $800 in reserves and $3200 in loans.

Question 8

-Refer to the Table 10-1. What is the reserve ratio?

Accepted Answer

A)  0 percent 
B)  15 percent 
C)  85 percent 
D)  100 percent 
A)  0 percent 
B)  15 percent 
C)  85 percent 
D)  100 percent

Question 9

If the Bank of Canada decreases reserve requirements, the money supply will increase.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)  currency 
B)  demand deposits 
C)  savings deposits 
D)  gold 
A)  currency 
B)  demand deposits 
C)  savings deposits 
D)  gold

Question 11

What is a characteristic of Scotiabank?

Accepted Answer

A)  It can issue currency. 
B)  It is part of the "big 5" commercial banks group. 
C)  It acts as a central bank for Nova Scotia. 
D)  It is owned by the Canadian government. 
A)  It can issue currency. 
B)  It is part of the "big 5" commercial banks group. 
C)  It acts as a central bank for Nova Scotia. 
D)  It is owned by the Canadian government.

Question 12

Monetary policy is determined by the Bank of Canada's governor.

Accepted Answer

A) True 
 B)False

Question 13

Which list contains only actions that increase 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 14

If the reserve ratio is 20 percent, how much new money can $1000 of excess reserves create?

Accepted Answer

A)  $500 
B)  $5000 
C)  $50,000 
D)  $500,000 
A)  $500 
B)  $5000 
C)  $50,000 
D)  $500,000

Question 15

Since 1994, what was phased out as a tool used by the Bank of Canada to control the money supply?

Accepted Answer

A)  changing reserve requirements 
B)  changing the overnight rate 
C)  open-market operations 
D)  foreign exchange market operations 
A)  changing reserve requirements 
B)  changing the overnight rate 
C)  open-market operations 
D)  foreign exchange market operations

Question 16

Table 10-4
The following information pertains to the Bank of Moncton.
 
-Refer to the Table 10-4. If all banks hold only the required 4 percent of deposits as reserves, then what is the money multiplier?

Accepted Answer

A)  5 
B)  10 
C)  15 
D)  25 
A)  5 
B)  10 
C)  15 
D)  25

Question 17

Which of the following is included in M1+?

Accepted Answer

A)  credit cards 
B)  debit cards 
C)  currency 
D)  nonpersonal demand deposits 
A)  credit cards 
B)  debit cards 
C)  currency 
D)  nonpersonal demand deposits

Question 18

Bottles of very fine wine have less liquidity than demand deposits.

Accepted Answer

A) True 
 B)False

Question 19

Which organization plays the role of a central bank in Canada?

Accepted Answer

A)  TD Canada Trust 
B)  the Canadian Imperial Bank of Commerce 
C)  the Bank of Canada 
D)  the Royal Bank of Canada 
A)  TD Canada Trust 
B)  the Canadian Imperial Bank of Commerce 
C)  the Bank of Canada 
D)  the Royal Bank of Canada

Question 20

A bank has (in millions): $200 reserves, $800 loans, $400 securities, $1200 deposits, $100 debt, and $200 capital. How much is the bank's leverage ratio?

Accepted Answer

A)  0.07 
B)  0.17 
C)  7 
D)  14 
A)  0.07 
B)  0.17 
C)  7 
D)  14

Which statement best defines reserve requirements?

A bank has (in millions): $200 assets, $140 deposits, and $40 debt. If the bank's assets decrease by 10 percent, by how much does the bank's capital change?

If the reserve ratio is 100 percent, how much will the money supply eventually increase if there is a deposit of $500 of paper money in a bank?

How may the Bank of Canada influence the price level?

Which statement best defines liquidity?

Suppose that the reserve ratio is 7 percent and that a bank has $3000 in deposits. What are its required reserves?

Suppose a bank has a 6 percent reserve ratio, $4000 in deposits, and it loans out all it can, given the reserve ratio. Which of the following describes the bank's assets?

-Refer to the Table 10-1. What is the reserve ratio?

If the Bank of Canada decreases reserve requirements, the money supply will increase.

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

What is a characteristic of Scotiabank?

Monetary policy is determined by the Bank of Canada's governor.

Which list contains only actions that increase the money supply?

If the reserve ratio is 20 percent, how much new money can $1000 of excess reserves create?

Since 1994, what was phased out as a tool used by the Bank of Canada to control the money supply?

Table 10-4 The following information pertains to the Bank of Moncton. -Refer to the Table 10-4. If all banks hold only the required 4 percent of deposits as reserves, then what is the money multiplier?

Which of the following is included in M1+?

Bottles of very fine wine have less liquidity than demand deposits.

Which organization plays the role of a central bank in Canada?

A bank has (in millions): $200 reserves, $800 loans, $400 securities, $1200 deposits, $100 debt, and $200 capital. How much is the bank's leverage 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

Which statement best defines reserve requirements?

A bank has (in millions): $200 assets, $140 deposits, and $40 debt. If the bank's assets decrease by 10 percent, by how much does the bank's capital change?

If the reserve ratio is 100 percent, how much will the money supply eventually increase if there is a deposit of $500 of paper money in a bank?

How may the Bank of Canada influence the price level?

Which statement best defines liquidity?

Suppose that the reserve ratio is 7 percent and that a bank has $3000 in deposits. What are its required reserves?

Suppose a bank has a 6 percent reserve ratio, $4000 in deposits, and it loans out all it can, given the reserve ratio. Which of the following describes the bank's assets?

-Refer to the Table 10-1. What is the reserve ratio?

If the Bank of Canada decreases reserve requirements, the money supply will increase.

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

What is a characteristic of Scotiabank?

Monetary policy is determined by the Bank of Canada's governor.

Which list contains only actions that increase the money supply?

If the reserve ratio is 20 percent, how much new money can $1000 of excess reserves create?

Since 1994, what was phased out as a tool used by the Bank of Canada to control the money supply?

Table 10-4 The following information pertains to the Bank of Moncton. -Refer to the Table 10-4. If all banks hold only the required 4 percent of deposits as reserves, then what is the money multiplier?

Which of the following is included in M1+?

Bottles of very fine wine have less liquidity than demand deposits.

Which organization plays the role of a central bank in Canada?

A bank has (in millions): $200 reserves, $800 loans, $400 securities, $1200 deposits, $100 debt, and $200 capital. How much is the bank's leverage 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