Question 1

Which of the following is NOT part of M2?

Accepted Answer

A)  money market deposit accounts 
B)  coins 
C)  traveller's cheques 
D)  money market mutual funds accounts 
A)  money market deposit accounts 
B)  coins 
C)  traveller's cheques 
D)  money market mutual funds accounts

Question 2

Exhibit 13-1
  
-Refer to the table in the exhibit.Suppose the interest rate on loans is 10 percent.What is the annual cost to EuBank of holding excess reserves?

Accepted Answer

A)  10 percent of $500,000 
B)  10 percent of net worth 
C)  10 percent of excess reserves 
D)  $10,000 
A)  10 percent of $500,000 
B)  10 percent of net worth 
C)  10 percent of excess reserves 
D)  $10,000

Question 3

If a bank calls in a loan to replenish its reserves, what is likely to happen to the other bank's reserves?

Accepted Answer

A)  another bank's desired reserves will increase 
B)  another bank's desired reserves will decrease 
C)  another bank's actual reserves will increase 
D)  another bank's actual reserves will decrease 
A)  another bank's desired reserves will increase 
B)  another bank's desired reserves will decrease 
C)  another bank's actual reserves will increase 
D)  another bank's actual reserves will decrease

Question 4

How do banks minimize the risk of loss to depositors?

Accepted Answer

A)  by making many different loans to different borrowers 
B)  by refusing to lend money to the Canadian government 
C)  by putting all their eggs in one basket 
D)  by making very-long-term loans 
A)  by making many different loans to different borrowers 
B)  by refusing to lend money to the Canadian government 
C)  by putting all their eggs in one basket 
D)  by making very-long-term loans

Question 5

Why is lowering the bank rate a way to expand the money supply?

Accepted Answer

A)  because it encourages banks to borrow from the Bank of Canada so they can more easily accommodate their customers' needs for loans 
B)  because it encourages business customers to borrow directly from the Bank of Canada 
C)  because a lower bank rate reduces the amount of reserves banks desire to keep 
D)  because a lower bank rate automatically reduces excess reserves 
A)  because it encourages banks to borrow from the Bank of Canada so they can more easily accommodate their customers' needs for loans 
B)  because it encourages business customers to borrow directly from the Bank of Canada 
C)  because a lower bank rate reduces the amount of reserves banks desire to keep 
D)  because a lower bank rate automatically reduces excess reserves

Question 6

Which of the following is included in the narrowest definition of the money supply?

Accepted Answer

A)  cash in bank vaults 
B)  savings deposits 
C)  negotiable certificates of deposit 
D)  chequable deposits 
A)  cash in bank vaults 
B)  savings deposits 
C)  negotiable certificates of deposit 
D)  chequable deposits

Question 7

What difference makes up a bank's profit?

Accepted Answer

A)  the difference between interest charged to depositors and interest offered to borrowers 
B)  the difference between interest charged on loans and interest paid on deposits 
C)  the difference between deposit balances and loan balances 
D)  the difference between liabilities and deposits 
A)  the difference between interest charged to depositors and interest offered to borrowers 
B)  the difference between interest charged on loans and interest paid on deposits 
C)  the difference between deposit balances and loan balances 
D)  the difference between liabilities and deposits

Question 8

Suppose the First National Bank acquires $500,000 in new deposits and the desired reserve ratio is 12 percent.What are the desired reserves of this bank?

Accepted Answer

A)  $12,000 
B)  $60,000 
C)  $440000 
D)  $500,000 
A)  $12,000 
B)  $60,000 
C)  $440000 
D)  $500,000

Question 9

Suppose at the end of the business day a bank has $50,000 in excess reserves, and the desired reserve ratio is 20 percent.How can the bank maximize its profits?

Accepted Answer

A)  if it keeps the excess reserves 
B)  if it loans out $40,000 
C)  if it loans $50,000 to another bank 
D)  if it borrows $50,000 to remove the excess reserves 
A)  if it keeps the excess reserves 
B)  if it loans out $40,000 
C)  if it loans $50,000 to another bank 
D)  if it borrows $50,000 to remove the excess reserves

Question 10

How is M2 defined?

Accepted Answer

A)  as M1 plus savings accounts, small time deposits, and money market mutual funds 
B)  as coins, currency, and chequable deposits 
C)  as all near monies 
D)  as M1 + time deposits 
A)  as M1 plus savings accounts, small time deposits, and money market mutual funds 
B)  as coins, currency, and chequable deposits 
C)  as all near monies 
D)  as M1 + time deposits

Question 11

Narrowly defined, what is the primary composition of the M1+ money supply?

Accepted Answer

A)  coins and currency 
B)  chequable deposits 
C)  gold and silver 
D)  certificates of deposit 
A)  coins and currency 
B)  chequable deposits 
C)  gold and silver 
D)  certificates of deposit

Question 12

Which of the following is the simple money multiplier equal to?

Accepted Answer

A)  1 divided by the dollar amount of desired reserves 
B)  the dollar amount of total reserves divided by the dollar amount of excess reserves 
C)  the dollar amount of excess reserves divided by the dollar amount of total reserves 
D)  1 divided by the percentage of deposits that must be held by a bank in the form of reserves 
A)  1 divided by the dollar amount of desired reserves 
B)  the dollar amount of total reserves divided by the dollar amount of excess reserves 
C)  the dollar amount of excess reserves divided by the dollar amount of total reserves 
D)  1 divided by the percentage of deposits that must be held by a bank in the form of reserves

Question 13

Which of the following would likely increase the money supply?

Accepted Answer

A)  One bank buys government securities from another bank. 
B)  The desired reserve ratio increases. 
C)  A chartered bank sells securities to the Bank of Canada. 
D)  A chartered bank buys securities from the Bank of Canada. 
A)  One bank buys government securities from another bank. 
B)  The desired reserve ratio increases. 
C)  A chartered bank sells securities to the Bank of Canada. 
D)  A chartered bank buys securities from the Bank of Canada.

Question 14

Suppose a bank has $8,000 in chequable deposits and the desired reserve ratio is 0.2.And suppose actual reserves equal $3,000.What do excess reserves equal?

Accepted Answer

A)  $1,400 
B)  $1,600 
C)  $2,400 
D)  $5,000 
A)  $1,400 
B)  $1,600 
C)  $2,400 
D)  $5,000

Question 15

Suppose the desired reserve ratio is 20 percent and a bank has $100,000 in chequable deposits.What are the bank's desired reserves?

Accepted Answer

A)  $500,000 
B)  $100,000 
C)  $80,000 
D)  $20,000 
A)  $500,000 
B)  $100,000 
C)  $80,000 
D)  $20,000

Question 16

What comprises the money supply as it is most narrowly defined?

Accepted Answer

A)  coins and currency held by the nonbanking public, traveller's cheques, and savings deposits 
B)  all coins and currency held by the nonbanking public 
C)  coins and currency held by the nonbanking public, chequing deposits, and traveller's cheques 
D)  coins and currency held by the nonbanking public, chequing deposits, and savings deposits 
A)  coins and currency held by the nonbanking public, traveller's cheques, and savings deposits 
B)  all coins and currency held by the nonbanking public 
C)  coins and currency held by the nonbanking public, chequing deposits, and traveller's cheques 
D)  coins and currency held by the nonbanking public, chequing deposits, and savings deposits

Question 17

In what form can bank reserves be held?

Accepted Answer

A)  as loans and cash in the bank's vault 
B)  as loans and deposits with the Bank of Canada 
C)  as loans and chequing accounts 
D)  as deposits with the Bank of Canada and cash in the bank's vault 
A)  as loans and cash in the bank's vault 
B)  as loans and deposits with the Bank of Canada 
C)  as loans and chequing accounts 
D)  as deposits with the Bank of Canada and cash in the bank's vault

Question 18

Suppose Sylvia returned a $5 Bank of Canada note to the Bank of Canada.What might she receive in return?

Accepted Answer

A)  $5 in silver 
B)  $5 in gold 
C)  5 loonies 
D)  10 loonies 
A)  $5 in silver 
B)  $5 in gold 
C)  5 loonies 
D)  10 loonies

Question 19

Suppose the Bank of Canada purchases government securities on the open market.How will the money supply be affected?

Accepted Answer

A)  The money supply will decrease. 
B)  The money supply will increase only if the seller of those securities is a chartered bank. 
C)  The money supply will increase through the system of securities dealers rather than through the chartered banking system. 
D)  The money supply will increase through the chartered banking system regardless of who the seller is. 
A)  The money supply will decrease. 
B)  The money supply will increase only if the seller of those securities is a chartered bank. 
C)  The money supply will increase through the system of securities dealers rather than through the chartered banking system. 
D)  The money supply will increase through the chartered banking system regardless of who the seller is.

Question 20

When the Bank of Canada buys Canadian government securities from a chartered bank, what is the immediate effect on that chartered bank's balance sheet assets and liabilities?

Accepted Answer

A)  Assets decrease and liabilities decrease. 
B)  Assets increase and liabilities increase. 
C)  Assets increase and liabilities decrease. 
D)  The total amount of assets or liabilities remain the same. 
A)  Assets decrease and liabilities decrease. 
B)  Assets increase and liabilities increase. 
C)  Assets increase and liabilities decrease. 
D)  The total amount of assets or liabilities remain the same.

Which of the following is NOT part of M2?

Exhibit 13-1 -Refer to the table in the exhibit.Suppose the interest rate on loans is 10 percent.What is the annual cost to EuBank of holding excess reserves?

If a bank calls in a loan to replenish its reserves, what is likely to happen to the other bank's reserves?

How do banks minimize the risk of loss to depositors?

Why is lowering the bank rate a way to expand the money supply?

Which of the following is included in the narrowest definition of the money supply?

What difference makes up a bank's profit?

Suppose the First National Bank acquires $500,000 in new deposits and the desired reserve ratio is 12 percent.What are the desired reserves of this bank?

Suppose at the end of the business day a bank has $50,000 in excess reserves, and the desired reserve ratio is 20 percent.How can the bank maximize its profits?

How is M2 defined?

Narrowly defined, what is the primary composition of the M1+ money supply?

Which of the following is the simple money multiplier equal to?

Which of the following would likely increase the money supply?

Suppose a bank has $8,000 in chequable deposits and the desired reserve ratio is 0.2.And suppose actual reserves equal $3,000.What do excess reserves equal?

Suppose the desired reserve ratio is 20 percent and a bank has $100,000 in chequable deposits.What are the bank's desired reserves?

What comprises the money supply as it is most narrowly defined?

In what form can bank reserves be held?

Suppose Sylvia returned a $5 Bank of Canada note to the Bank of Canada.What might she receive in return?

Suppose the Bank of Canada purchases government securities on the open market.How will the money supply be affected?

When the Bank of Canada buys Canadian government securities from a chartered bank, what is the immediate effect on that chartered bank's balance sheet assets and liabilities?

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, Supply, and Markets

Algebraic Approach to Demand, Supply, and Equilibrium

Introduction to Macroeconomics

Tracking the Canadian Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Money and the Financial System

Monetary Theory and Policy in an Open Economy

Macro Policy Debate: Active or Passive

International Finance

International Trade

Economic Development

Understanding Graphs

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Exam 14: Banking and the Money Supply

Which of the following is NOT part of M2?

Exhibit 13-1 -Refer to the table in the exhibit.Suppose the interest rate on loans is 10 percent.What is the annual cost to EuBank of holding excess reserves?

If a bank calls in a loan to replenish its reserves, what is likely to happen to the other bank's reserves?

How do banks minimize the risk of loss to depositors?

Why is lowering the bank rate a way to expand the money supply?

Which of the following is included in the narrowest definition of the money supply?

What difference makes up a bank's profit?

Suppose the First National Bank acquires $500,000 in new deposits and the desired reserve ratio is 12 percent.What are the desired reserves of this bank?

Suppose at the end of the business day a bank has $50,000 in excess reserves, and the desired reserve ratio is 20 percent.How can the bank maximize its profits?

How is M2 defined?

Narrowly defined, what is the primary composition of the M1+ money supply?

Which of the following is the simple money multiplier equal to?

Which of the following would likely increase the money supply?

Suppose a bank has $8,000 in chequable deposits and the desired reserve ratio is 0.2.And suppose actual reserves equal $3,000.What do excess reserves equal?

Suppose the desired reserve ratio is 20 percent and a bank has $100,000 in chequable deposits.What are the bank's desired reserves?

What comprises the money supply as it is most narrowly defined?

In what form can bank reserves be held?

Suppose Sylvia returned a $5 Bank of Canada note to the Bank of Canada.What might she receive in return?

Suppose the Bank of Canada purchases government securities on the open market.How will the money supply be affected?

When the Bank of Canada buys Canadian government securities from a chartered bank, what is the immediate effect on that chartered bank's balance sheet assets and liabilities?

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, Supply, and Markets

Algebraic Approach to Demand, Supply, and Equilibrium

Introduction to Macroeconomics

Tracking the Canadian Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Money and the Financial System

Monetary Theory and Policy in an Open Economy

Macro Policy Debate: Active or Passive

International Finance

International Trade

Economic Development

Understanding Graphs

Filters