Question 1

Exhibit 13-3
  
-Refer to the table in the exhibit.How have LeftBank's total reserves changed?

Accepted Answer

A)  Total reserves fell by $9,000. 
B)  Total reserves rose by $9,000. 
C)  Total reserves fell by $10,000. 
D)  Total reserves rose by $10,000. 
A)  Total reserves fell by $9,000. 
B)  Total reserves rose by $9,000. 
C)  Total reserves fell by $10,000. 
D)  Total reserves rose by $10,000.

Question 2

What is the term for the ability to convert a store of value into a medium of exchange with little loss of value?

Accepted Answer

A)  arbitrage 
B)  solvency 
C)  liquidity 
D)  liability 
A)  arbitrage 
B)  solvency 
C)  liquidity 
D)  liability

Question 3

Which of the following best describes why banks are financial intermediaries?

Accepted Answer

A)  because banks bring together the two sides of the market, i.e., savers and borrowers 
B)  because banks bring different savers into contact with each other 
C)  because banks bring about the merger of smaller banks to make larger ones 
D)  because banks resolve disputes between stockbrokers, mortgage companies, insurance agencies, and other financial institutions 
A)  because banks bring together the two sides of the market, i.e., savers and borrowers 
B)  because banks bring different savers into contact with each other 
C)  because banks bring about the merger of smaller banks to make larger ones 
D)  because banks resolve disputes between stockbrokers, mortgage companies, insurance agencies, and other financial institutions

Question 4

Suppose the Bank of Canada sells a member bank a $3,000 security, the desired reserve ratio is 20 percent, banks hold no excess reserves, and all loans are redeposited.How is the money supply affected?

Accepted Answer

A)  The money supply increases by less than $15,000. 
B)  The money supply decreases by less than $15,000. 
C)  The money supply increases by $15,000. 
D)  The money supply decreases by $15,000. 
A)  The money supply increases by less than $15,000. 
B)  The money supply decreases by less than $15,000. 
C)  The money supply increases by $15,000. 
D)  The money supply decreases by $15,000.

Question 5

Suppose the Bank of Canada sells $10 million in government securities to a chartered bank.And suppose the desired reserve ratio is 0.2.What is the maximum amount by which chequable deposits in the banking system could change?

Accepted Answer

A)  +$10,000,000 
B)  -$10,000,000 
C)  +$50,000,000 
D)  -$50,000,000 
A)  +$10,000,000 
B)  -$10,000,000 
C)  +$50,000,000 
D)  -$50,000,000

Question 6

Suppose the desired reserve ratio is 10 percent and a bank receives a new deposit for $100,000.By what amount do the bank's liabilities initially increase?

Accepted Answer

A)  by $10,000 
B)  by $90,000 
C)  by $100,000 
D)  by $1,000,000 
A)  by $10,000 
B)  by $90,000 
C)  by $100,000 
D)  by $1,000,000

Question 7

Suppose a bank has $100 million in chequable deposits and the desired reserve ratio is 0.1.And suppose the bank has $5 million in excess reserves.What is the maximum amount the bank can lend?

Accepted Answer

A)  $0 
B)  $5 million 
C)  $10 million 
D)  $15 million 
A)  $0 
B)  $5 million 
C)  $10 million 
D)  $15 million

Question 8

What is the main purpose of the overnight money market?

Accepted Answer

A)  for banks to make loans to the Bank of Canada 
B)  for banks to make short-term loans to other banks 
C)  for banks to make long-term loans to other banks 
D)  for the Bank of Canada to make short-term loans to chartered banks 
A)  for banks to make loans to the Bank of Canada 
B)  for banks to make short-term loans to other banks 
C)  for banks to make long-term loans to other banks 
D)  for the Bank of Canada to make short-term loans to chartered banks

Question 9

Which of the following is NOT legal tender in Canada?

Accepted Answer

A)  a toonie 
B)  a cheque 
C)  a $50 bill 
D)  a $100 bill 
A)  a toonie 
B)  a cheque 
C)  a $50 bill 
D)  a $100 bill

Question 10

How is the simple money multiplier defined?

Accepted Answer

A)  as the reciprocal of the interest rate 
B)  as 1/desired reserve ratio 
C)  as excess reserves plus required reserves 
D)  the reciprocal of the federal funds rate 
A)  as the reciprocal of the interest rate 
B)  as 1/desired reserve ratio 
C)  as excess reserves plus required reserves 
D)  the reciprocal of the federal funds rate

Question 11

How does the desired reserve ratio affect the money multiplier?

Accepted Answer

A)  the higher the desired reserve ratio, the larger the money multiplier 
B)  the higher the desired reserve ratio, the smaller the money multiplier 
C)  the higher the desired reserve ratio, the more likely there will be no effect on the money multiplier 
D)  the higher the desired reserve ratio, the more likely the money multiplier may increase or decrease 
A)  the higher the desired reserve ratio, the larger the money multiplier 
B)  the higher the desired reserve ratio, the smaller the money multiplier 
C)  the higher the desired reserve ratio, the more likely there will be no effect on the money multiplier 
D)  the higher the desired reserve ratio, the more likely the money multiplier may increase or decrease

Question 12

Suppose the desired reserve ratio is 0.1, and Linda deposits $4,000 in cash at the Dominion National Bank.And suppose the bank held no excess reserves before Linda's deposit, and the bank now increases its reserves by $500.How much excess reserve does this bank have?

Accepted Answer

A)  $50 
B)  $100 
C)  $400 
D)  $500 
A)  $50 
B)  $100 
C)  $400 
D)  $500

Question 13

In which market do banks borrow excess reserves from each other on a day-to-day basis?

Accepted Answer

A)  in the liquidity market 
B)  in the stock market 
C)  in the bond market 
D)  in the overnight money market 
A)  in the liquidity market 
B)  in the stock market 
C)  in the bond market 
D)  in the overnight money market

Question 14

Consider the Bank of Canada's purchase of Canadian government securities.What type of policy is this?

Accepted Answer

A)  It is a contractionary policy because it lowers the amount of total reserves in the banking system. 
B)  It is a contractionary policy because it lowers the amount of excess reserves in the banking system. 
C)  It is an expansionary policy because it raises the amount of total reserves in the banking system. 
D)  It is an expansionary policy because it lowers the amount of total reserves in the banking system. 
A)  It is a contractionary policy because it lowers the amount of total reserves in the banking system. 
B)  It is a contractionary policy because it lowers the amount of excess reserves in the banking system. 
C)  It is an expansionary policy because it raises the amount of total reserves in the banking system. 
D)  It is an expansionary policy because it lowers the amount of total reserves in the banking system.

Question 15

Which of the following is an accounting identity related to assets and liabilities on a bank's balance sheet?

Accepted Answer

A)  Assets are always less than liabilities. 
B)  Assets equal liabilities plus net worth. 
C)  Assets equal liabilities minus net worth. 
D)  Liabilities equal assets plus net worth. 
A)  Assets are always less than liabilities. 
B)  Assets equal liabilities plus net worth. 
C)  Assets equal liabilities minus net worth. 
D)  Liabilities equal assets plus net worth.

Question 16

Why do retail stores have the option to accept cheques or NOT, but the acceptance of currency is required?

Accepted Answer

A)  because currency is backed by gold 
B)  because cheques are NOT money but currency is 
C)  because currency is legal tender but cheques are NOT 
D)  because currency is a medium of exchange but cheques are NOT 
A)  because currency is backed by gold 
B)  because cheques are NOT money but currency is 
C)  because currency is legal tender but cheques are NOT 
D)  because currency is a medium of exchange but cheques are NOT

Question 17

Exeter Bank has $100 million in chequable deposits and $10 million in net worth.With a 10 percent reserve requirement, what must Exeter Bank maintain in reserves?

Accepted Answer

A)  $1 million 
B)  $2 million 
C)  $5 million 
D)  $10 million 
A)  $1 million 
B)  $2 million 
C)  $5 million 
D)  $10 million

Question 18

What type of monetary policy raises the bank rate?

Accepted Answer

A)  an expansionary policy, because the ratio of excess to total reserves in the banking system is raised 
B)  a contractionary policy, because the banks' costs of borrowing are lowered 
C)  a contractionary policy, because the chartered banks' costs of borrowing are lowered 
D)  an expansionary policy, because allowing banks to charge higher interest rates will increase their willingness to make loans 
A)  an expansionary policy, because the ratio of excess to total reserves in the banking system is raised 
B)  a contractionary policy, because the banks' costs of borrowing are lowered 
C)  a contractionary policy, because the chartered banks' costs of borrowing are lowered 
D)  an expansionary policy, because allowing banks to charge higher interest rates will increase their willingness to make loans

Question 19

How does a higher bank rate affect reserves?

Accepted Answer

A)  Desired reserves increase. 
B)  Desired reserves decrease. 
C)  Excess reserves decrease. 
D)  Excess reserves increase. 
A)  Desired reserves increase. 
B)  Desired reserves decrease. 
C)  Excess reserves decrease. 
D)  Excess reserves increase.

Question 20

Suppose new reserves introduced into the banking system will be converted.Which of the following conversions will halt money expansion?

Accepted Answer

A)  if the new reserves are converted to excess reserves 
B)  if the new reserves are converted to securities 
C)  if the new reserves are converted to deposits 
D)  if the new reserves are converted to desired reserves 
A)  if the new reserves are converted to excess reserves 
B)  if the new reserves are converted to securities 
C)  if the new reserves are converted to deposits 
D)  if the new reserves are converted to desired reserves

Exhibit 13-3 -Refer to the table in the exhibit.How have LeftBank's total reserves changed?

What is the term for the ability to convert a store of value into a medium of exchange with little loss of value?

Which of the following best describes why banks are financial intermediaries?

Suppose the Bank of Canada sells a member bank a $3,000 security, the desired reserve ratio is 20 percent, banks hold no excess reserves, and all loans are redeposited.How is the money supply affected?

Suppose the Bank of Canada sells $10 million in government securities to a chartered bank.And suppose the desired reserve ratio is 0.2.What is the maximum amount by which chequable deposits in the banking system could change?

Suppose the desired reserve ratio is 10 percent and a bank receives a new deposit for $100,000.By what amount do the bank's liabilities initially increase?

Suppose a bank has $100 million in chequable deposits and the desired reserve ratio is 0.1.And suppose the bank has $5 million in excess reserves.What is the maximum amount the bank can lend?

What is the main purpose of the overnight money market?

Which of the following is NOT legal tender in Canada?

How is the simple money multiplier defined?

How does the desired reserve ratio affect the money multiplier?

Suppose the desired reserve ratio is 0.1, and Linda deposits $4,000 in cash at the Dominion National Bank.And suppose the bank held no excess reserves before Linda's deposit, and the bank now increases its reserves by $500.How much excess reserve does this bank have?

In which market do banks borrow excess reserves from each other on a day-to-day basis?

Consider the Bank of Canada's purchase of Canadian government securities.What type of policy is this?

Which of the following is an accounting identity related to assets and liabilities on a bank's balance sheet?

Why do retail stores have the option to accept cheques or NOT, but the acceptance of currency is required?

Exeter Bank has $100 million in chequable deposits and $10 million in net worth.With a 10 percent reserve requirement, what must Exeter Bank maintain in reserves?

What type of monetary policy raises the bank rate?

How does a higher bank rate affect reserves?

Suppose new reserves introduced into the banking system will be converted.Which of the following conversions will halt money expansion?

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

Exhibit 13-3 -Refer to the table in the exhibit.How have LeftBank's total reserves changed?

What is the term for the ability to convert a store of value into a medium of exchange with little loss of value?

Which of the following best describes why banks are financial intermediaries?

Suppose the Bank of Canada sells a member bank a $3,000 security, the desired reserve ratio is 20 percent, banks hold no excess reserves, and all loans are redeposited.How is the money supply affected?

Suppose the Bank of Canada sells $10 million in government securities to a chartered bank.And suppose the desired reserve ratio is 0.2.What is the maximum amount by which chequable deposits in the banking system could change?

Suppose the desired reserve ratio is 10 percent and a bank receives a new deposit for $100,000.By what amount do the bank's liabilities initially increase?

Suppose a bank has $100 million in chequable deposits and the desired reserve ratio is 0.1.And suppose the bank has $5 million in excess reserves.What is the maximum amount the bank can lend?

What is the main purpose of the overnight money market?

Which of the following is NOT legal tender in Canada?

How is the simple money multiplier defined?

How does the desired reserve ratio affect the money multiplier?

Suppose the desired reserve ratio is 0.1, and Linda deposits $4,000 in cash at the Dominion National Bank.And suppose the bank held no excess reserves before Linda's deposit, and the bank now increases its reserves by $500.How much excess reserve does this bank have?

In which market do banks borrow excess reserves from each other on a day-to-day basis?

Consider the Bank of Canada's purchase of Canadian government securities.What type of policy is this?

Which of the following is an accounting identity related to assets and liabilities on a bank's balance sheet?

Why do retail stores have the option to accept cheques or NOT, but the acceptance of currency is required?

Exeter Bank has $100 million in chequable deposits and $10 million in net worth.With a 10 percent reserve requirement, what must Exeter Bank maintain in reserves?

What type of monetary policy raises the bank rate?

How does a higher bank rate affect reserves?

Suppose new reserves introduced into the banking system will be converted.Which of the following conversions will halt money expansion?

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