Question 1

Banks could not change the money supply if they were required to hold all deposits in reserve.

Accepted Answer

A) True 
 B)False

Question 2

What is current Canadian currency?

Accepted Answer

A)  fiat money with intrinsic value 
B)  fiat money with no intrinsic value 
C)  commodity money with intrinsic value 
D)  commodity money with no intrinsic value 
A)  fiat money with intrinsic value 
B)  fiat money with no intrinsic value 
C)  commodity money with intrinsic value 
D)  commodity money with no intrinsic value

Question 3

What do the Bank of Canada's policy decisions have an important influence on?

Accepted Answer

A)  both the rate of inflation and the level of employment in the short run 
B)  the rate of inflation in the long run and the level of employment in the short run 
C)  the rate of inflation in the short run and the level of employment in the long run 
D)  both the rate of inflation and the level of employment in both the short run and the long run 
A)  both the rate of inflation and the level of employment in the short run 
B)  the rate of inflation in the long run and the level of employment in the short run 
C)  the rate of inflation in the short run and the level of employment in the long run 
D)  both the rate of inflation and the level of employment in both the short run and the long run

Question 4

If the reserve ratio is 10 percent and a bank receives a new deposit of $20, what happens to the bank's reserves in the longer term?

Accepted Answer

A)  increase by $2 
B)  increase by $18 
C)  increase by $20 
D)  increase by $200 
A)  increase by $2 
B)  increase by $18 
C)  increase by $20 
D)  increase by $200

Question 5

Which of the following is included in M2?

Accepted Answer

A)  gold 
B)  mortgages 
C)  currency 
D)  investment accounts 
A)  gold 
B)  mortgages 
C)  currency 
D)  investment accounts

Question 6

Which of the following does M1+ include?

Accepted Answer

A)  currency 
B)  savings deposits 
C)  travellers' cheques 
D)  foreign currency accounts 
A)  currency 
B)  savings deposits 
C)  travellers' cheques 
D)  foreign currency accounts

Question 7

Table 10-3
The following information pertains to the Bank of Kamloops. 
 
-Refer to the Table 10-3. Assume that all other banks hold only the required 5 percent of deposits as reserves and people hold only deposits and no currency. If the Bank of Kamloops decides to hold exactly 5 percent in reserves, by how much would the economy's money supply increase?

Accepted Answer

A)  $500 
B)  $1200 
C)  $1500 
D)  $2000 
A)  $500 
B)  $1200 
C)  $1500 
D)  $2000

Question 8

The Bank of Canada is run by the Board of Directors, which is appointed by the Minister of Finance.

Accepted Answer

A) True 
 B)False

Question 9

Which of the three functions of money are met by each of the following assets in the Canadian economy??a. paper dollar?b. precious metals?c. collectibles such as baseball cards, stamps, and antiques

Accepted Answer

a. medium of exchang

Question 10

Suppose the reserve ratio is 25 percent and the public holds $10 million in cash. Then the public decides to withdraw $5 million from the banks. How does the money supply eventually change?

Accepted Answer

A)  falls by $5 million 
B)  falls by $10 million 
C)  falls by $20 million 
D)  falls by $35 million 
A)  falls by $5 million 
B)  falls by $10 million 
C)  falls by $20 million 
D)  falls by $35 million

Question 11

What is the function of debit cards?

Accepted Answer

A)  They defer payments. 
B)  They are equivalent to credit cards. 
C)  They are included in M2. 
D)  They are used as a method of payment. 
A)  They defer payments. 
B)  They are equivalent to credit cards. 
C)  They are included in M2. 
D)  They are used as a method of payment.

Question 12

The Bank of Canada was created in 1934 in the wake of the Great Depression.

Accepted Answer

A) True 
 B)False

Question 13

To increase the money supply, what could the Bank of Canada do?

Accepted Answer

A)  sell government bonds 
B)  increase the bank rate 
C)  decrease the reserve requirement 
D)  decrease the money multiplier 
A)  sell government bonds 
B)  increase the bank rate 
C)  decrease the reserve requirement 
D)  decrease the money multiplier

Question 14

A central bank raised the reserve requirement ratio from 8 percent to 10 percent. Other things the same, how does the money multiplier change?

Accepted Answer

A)  It increases by 2. 
B)  It decreases by 2. 
C)  It increases by 2.5 
D)  It decreases by 2.5 
A)  It increases by 2. 
B)  It decreases by 2. 
C)  It increases by 2.5 
D)  It decreases by 2.5

Question 15

If the central bank lowered the reserve requirement, what happens to the money multiplier and the money supply?

Accepted Answer

A)  The money multiplier increases, but the money supply decreases. 
B)  The money multiplier decreases, but the money supply increases. 
C)  The money multiplier and the money supply both increase. 
D)  The money multiplier and the money supply both decrease. 
A)  The money multiplier increases, but the money supply decreases. 
B)  The money multiplier decreases, but the money supply increases. 
C)  The money multiplier and the money supply both increase. 
D)  The money multiplier and the money supply both decrease.

Question 16

Joe wants to trade eggs for sausage. Lashonda wants to trade eggs for orange juice. Joe and Lashonda have a double coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 17

Table 10-4
The following information pertains to the Bank of Moncton.
 
-Refer to the Table 10-4. Assume that all other banks hold only the required 4 percent of deposits as reserves, and that people hold only deposits and no currency. If the Bank of Moncton decides to hold reserves of 4 percent, by how much would the economy's money supply increase?

Accepted Answer

A)  $30,000 
B)  $35,000 
C)  $42,000 
D)  $45,000 
A)  $30,000 
B)  $35,000 
C)  $42,000 
D)  $45,000

Question 18

How do deposits and reserves appear on a bank's T-account?

Accepted Answer

A)  Both deposits and reserves are assets. 
B)  Both deposits and reserves are liabilities. 
C)  Deposits are assets, and reserves are liabilities. 
D)  Reserves are assets, and deposits are liabilities. 
A)  Both deposits and reserves are assets. 
B)  Both deposits and reserves are liabilities. 
C)  Deposits are assets, and reserves are liabilities. 
D)  Reserves are assets, and deposits are liabilities.

Question 19

Which list contains only actions that increase the money supply?

Accepted Answer

A)  lowering the bank rate; raising the reserve requirement ratio 
B)  lowering the bank rate; lowing the reserve requirement ratio 
C)  raising the bank rate; raising the reserve requirement ratio 
D)  raising the bank rate; lowering the reserve requirement ratio 
A)  lowering the bank rate; raising the reserve requirement ratio 
B)  lowering the bank rate; lowing the reserve requirement ratio 
C)  raising the bank rate; raising the reserve requirement ratio 
D)  raising the bank rate; lowering the reserve requirement ratio

Question 20

Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

Accepted Answer

A) True 
 B)False

Banks could not change the money supply if they were required to hold all deposits in reserve.

What is current Canadian currency?

What do the Bank of Canada's policy decisions have an important influence on?

If the reserve ratio is 10 percent and a bank receives a new deposit of $20, what happens to the bank's reserves in the longer term?

Which of the following is included in M2?

Which of the following does M1+ include?

The Bank of Canada is run by the Board of Directors, which is appointed by the Minister of Finance.

Which of the three functions of money are met by each of the following assets in the Canadian economy??a. paper dollar?b. precious metals?c. collectibles such as baseball cards, stamps, and antiques

Suppose the reserve ratio is 25 percent and the public holds $10 million in cash. Then the public decides to withdraw $5 million from the banks. How does the money supply eventually change?

What is the function of debit cards?

The Bank of Canada was created in 1934 in the wake of the Great Depression.

To increase the money supply, what could the Bank of Canada do?

A central bank raised the reserve requirement ratio from 8 percent to 10 percent. Other things the same, how does the money multiplier change?

If the central bank lowered the reserve requirement, what happens to the money multiplier and the money supply?

Joe wants to trade eggs for sausage. Lashonda wants to trade eggs for orange juice. Joe and Lashonda have a double coincidence of wants.

How do deposits and reserves appear on a bank's T-account?

Which list contains only actions that increase the money supply?

Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

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

Banks could not change the money supply if they were required to hold all deposits in reserve.

What is current Canadian currency?

What do the Bank of Canada's policy decisions have an important influence on?

If the reserve ratio is 10 percent and a bank receives a new deposit of $20, what happens to the bank's reserves in the longer term?

Which of the following is included in M2?

Which of the following does M1+ include?

The Bank of Canada is run by the Board of Directors, which is appointed by the Minister of Finance.

Which of the three functions of money are met by each of the following assets in the Canadian economy??a. paper dollar?b. precious metals?c. collectibles such as baseball cards, stamps, and antiques

Suppose the reserve ratio is 25 percent and the public holds $10 million in cash. Then the public decides to withdraw $5 million from the banks. How does the money supply eventually change?

What is the function of debit cards?

The Bank of Canada was created in 1934 in the wake of the Great Depression.

To increase the money supply, what could the Bank of Canada do?

A central bank raised the reserve requirement ratio from 8 percent to 10 percent. Other things the same, how does the money multiplier change?

If the central bank lowered the reserve requirement, what happens to the money multiplier and the money supply?

Joe wants to trade eggs for sausage. Lashonda wants to trade eggs for orange juice. Joe and Lashonda have a double coincidence of wants.

How do deposits and reserves appear on a bank's T-account?

Which list contains only actions that increase the money supply?

Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

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