Exam 14: Banking and the Money Supply

Suppose the desired reserve ratio is 0.2 and the Bank of Canada buys $100,000 in government securities from Big Bank.How much money can the chartered banking system create?  

What is the Bank of Canada's most important monetary policy tool?  

Historically, what is the Bank of Canada's narrowest definition of money?  

In countries such as the United States, which of the following strategies might the central bank use to increase the money supply?  

Suppose a chartered bank's reserves increase by $3,000 and the bank, which holds no excess reserves, makes a loan of $2,400.What is the desired reserve ratio?  

Suppose the Bank of Canada buys $1,200 worth of Canadian government securities, and chequing deposits increase by $6,000 after all the rounds of the money-creation process are completed.What is the maximum value of the desired reserve ratio?  

Suppose a bank's desired reserve ratio is 15 percent, and the bank acquires new deposits of $100,000.What is the maximum amount the bank can lend from these new deposits?  

How could the Bank of Canada increase the money supply?  

Suppose that the desired reserve ratio is 0.2, and the Bank of Canada buys $5,000 of Canadian government securities from Bank A.Bank A then lends $4,000 and keeps $1,000 in its vault in cash.In this round of the money-creation process, by what amount has the money supply increased, as measured by M1+?  

Suppose a customer deposits $100 into her chequing account at the bank.What is the effect of the deposit on the bank?  

Which of the following is NOT a function of a depository institution?  

Suppose a bank has $6,000 in chequable deposits and the desired reserve ratio is 0.2.And suppose the bank wishes to hold no excess reserves.What are the bank's actual reserves?  

Consider the following money supplies: currency and coins held by the nonbanking public; and traveller's cheques, personal and nonpersonal chequable deposits and savings deposits, and personal time deposits held at chartered banks.Which money aggregate do these supplies belong to?  

Consider M2 plus similar deposits at trust and mortgage loans companies, credit unions, and caisses populaires life insurance company individual annuities; personal deposits at government-owned saving institutions; and money market mutual fund accounts.Which money aggregate do these supplies belong to?  

Suppose Emma banks at Bank A and she writes a cheque to her friend Davis, who banks at Bank B.What happens after the cheque clears?  

Which of the following is NOT included in M1+?  

How do banks help to overcome the problem of asymmetric information?  

Suppose the desired reserve ratio is 10 percent.And suppose the Bank of Canada reduces excess reserves by $100,000.How could chequable deposits be affected, assuming no bank holds excess reserves and nobody withdraws cash?  

Why has the distinction between M1 and M2 been blurred over time?  

When does symmetric information in financial markets exist?