Question 1

Which of the following best describes the use of credit cards?

Accepted Answer

A)  They have eliminated the use of money. 
B)  They are included in the narrow definition of money, M1. 
C)  They are near-money. 
D)  They are a way of postponing the payment of money. 
A)  They have eliminated the use of money. 
B)  They are included in the narrow definition of money, M1. 
C)  They are near-money. 
D)  They are a way of postponing the payment of money.

Question 2

Assume the banking system has no excess reserves, but the desired reserve is 20 percent.Suppose the Bank of Canada purchases $10,000 in Canadian government securities from the Academy National Bank.What is the ultimate potential increase in the money supply?

Accepted Answer

A)  $2,000 
B)  $8,000 
C)  $10,000 
D)  $50,000 
A)  $2,000 
B)  $8,000 
C)  $10,000 
D)  $50,000

Question 3

Which of the following is NOT an activity of the Bank of Canada?

Accepted Answer

A)  making loans to the public 
B)  clearing banks' cheques 
C)  lending funds to the federal government 
D)  purchasing Canadian government securities 
A)  making loans to the public 
B)  clearing banks' cheques 
C)  lending funds to the federal government 
D)  purchasing Canadian government securities

Question 4

Which of the following does liquidity NOT contribute to?

Accepted Answer

A)  the confidence of the bank's depositors 
B)  the bank's income 
C)  the bank's ability to pay funds out to depositors on demand 
D)  the bank's flexibility in responding to investment opportunities 
A)  the confidence of the bank's depositors 
B)  the bank's income 
C)  the bank's ability to pay funds out to depositors on demand 
D)  the bank's flexibility in responding to investment opportunities

Question 5

Consider the following money supplies: currency and coins held by the nonbanking public; and traveller's cheques and chequable deposits held at chartered banks, trust and mortgage loan companies, credit unions, and caisses populaires.Which money aggregate do these supplies belong to?

Accepted Answer

A)  M3 
B)  M2 
C)  M1+ 
D)  M1 
A)  M3 
B)  M2 
C)  M1+ 
D)  M1

Question 6

When a chartered bank sells Canadian government securities to the Bank of Canada, what is the immediate effect on reserves?

Accepted Answer

A)  The bank's desired reserves increase. 
B)  The bank's desired reserves decrease. 
C)  The bank's excess reserves increase. 
D)  The bank's excess reserves decrease. 
A)  The bank's desired reserves increase. 
B)  The bank's desired reserves decrease. 
C)  The bank's excess reserves increase. 
D)  The bank's excess reserves decrease.

Question 7

Suppose the simple money multiplier is 5.What must the desired reserve ratio be?

Accepted Answer

A)  0 
B)  5 percent 
C)  10 percent 
D)  20 percent 
A)  0 
B)  5 percent 
C)  10 percent 
D)  20 percent

Question 8

A bank finds itself short of desired reserves and therefore borrows from another chartered bank.What is the term for the interest rate on this loan?

Accepted Answer

A)  the liquidity rate 
B)  the prime rate 
C)  the discount rate 
D)  the overnight rate 
A)  the liquidity rate 
B)  the prime rate 
C)  the discount rate 
D)  the overnight rate

Question 9

Which of the following is a reason why banks differ from other types of businesses?

Accepted Answer

A)  because banks earn profits 
B)  because banks combine economic resources to produce services 
C)  because banks can go out of business 
D)  because banks can create money 
A)  because banks earn profits 
B)  because banks combine economic resources to produce services 
C)  because banks can go out of business 
D)  because banks can create money

Question 10

Which of the following is a liability for a bank?

Accepted Answer

A)  government securities 
B)  chequable deposits 
C)  consumer and business loans 
D)  building and furniture 
A)  government securities 
B)  chequable deposits 
C)  consumer and business loans 
D)  building and furniture

Question 11

Suppose a bank has $1 million in assets and $50,000 in net worth.What must its liabilities equal?

Accepted Answer

A)  $50,000 
B)  $950,000 
C)  $1,000,000 
D)  $1,050,000 
A)  $50,000 
B)  $950,000 
C)  $1,000,000 
D)  $1,050,000

Question 12

Suppose the desired reserve ratio is 15 percent.What is the simple money multiplier equal to?

Accepted Answer

A)  15 
B)  1/0.15 
C)  1/2.25 
D)  1/15 
A)  15 
B)  1/0.15 
C)  1/2.25 
D)  1/15

Question 13

Narrowly defined, which of the following represents most of the M1+ money supply?

Accepted Answer

A)  coins 
B)  currency 
C)  cash held by banks 
D)  chequable deposits 
A)  coins 
B)  currency 
C)  cash held by banks 
D)  chequable deposits

Question 14

Liquidity refers to the ease with which an asset can be converted into the medium of exchange without a significant loss of value.Which of the following assets is the least liquid?

Accepted Answer

A)  real estate 
B)  currency 
C)  traveller's cheques 
D)  chequable deposits 
A)  real estate 
B)  currency 
C)  traveller's cheques 
D)  chequable deposits

Question 15

Suppose the desired reserve ratio is 20 percent.And suppose the Bank of Canada injects $10,000 of new excess reserves.What will this injection create, assuming no bank holds excess reserves and nobody withdraws cash?

Accepted Answer

A)  $2,000 in new chequable deposits 
B)  $10,000 in new chequable deposits 
C)  $50,000 in new chequable deposits 
D)  $500,000 in new chequable deposits 
A)  $2,000 in new chequable deposits 
B)  $10,000 in new chequable deposits 
C)  $50,000 in new chequable deposits 
D)  $500,000 in new chequable deposits

Question 16

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

Accepted Answer

A)  the desired reserve ratio 
B)  the reciprocal of the desired reserve ratio 
C)  1 minus the desired reserve ratio 
D)  1 minus the reciprocal of the desired reserve ratio 
A)  the desired reserve ratio 
B)  the reciprocal of the desired reserve ratio 
C)  1 minus the desired reserve ratio 
D)  1 minus the reciprocal of the desired reserve ratio

Question 17

Which of the following is NOT among the assets of a chartered bank?

Accepted Answer

A)  chequable deposits 
B)  loans 
C)  securities 
D)  mortgages 
A)  chequable deposits 
B)  loans 
C)  securities 
D)  mortgages

Question 18

Consider a policy that increases the required reserve ratio in countries such as the United States.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 raises the amount of excess 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 raises the amount of excess reserves in the banking system.

Question 19

Which of the following defines the M1+ money supply?

Accepted Answer

A)  one-dollar bills 
B)  currency and coins held by the nonbanking public, chequable deposits, and traveller's cheques 
C)  M3 - M2 
D)  all currency and chequable deposits 
A)  one-dollar bills 
B)  currency and coins held by the nonbanking public, chequable deposits, and traveller's cheques 
C)  M3 - M2 
D)  all currency and chequable deposits

Question 20

How do banks act as financial intermediaries?

Accepted Answer

A)  by bringing together car buyers and auto dealers 
B)  by bringing together real estate brokers and home buyers 
C)  by printing money for all to use 
D)  by serving the credit needs of borrowers and the security needs of savers 
A)  by bringing together car buyers and auto dealers 
B)  by bringing together real estate brokers and home buyers 
C)  by printing money for all to use 
D)  by serving the credit needs of borrowers and the security needs of savers

Which of the following best describes the use of credit cards?

Assume the banking system has no excess reserves, but the desired reserve is 20 percent.Suppose the Bank of Canada purchases $10,000 in Canadian government securities from the Academy National Bank.What is the ultimate potential increase in the money supply?

Which of the following is NOT an activity of the Bank of Canada?

Which of the following does liquidity NOT contribute to?

Consider the following money supplies: currency and coins held by the nonbanking public; and traveller's cheques and chequable deposits held at chartered banks, trust and mortgage loan companies, credit unions, and caisses populaires.Which money aggregate do these supplies belong to?

When a chartered bank sells Canadian government securities to the Bank of Canada, what is the immediate effect on reserves?

Suppose the simple money multiplier is 5.What must the desired reserve ratio be?

A bank finds itself short of desired reserves and therefore borrows from another chartered bank.What is the term for the interest rate on this loan?

Which of the following is a reason why banks differ from other types of businesses?

Which of the following is a liability for a bank?

Suppose a bank has $1 million in assets and $50,000 in net worth.What must its liabilities equal?

Suppose the desired reserve ratio is 15 percent.What is the simple money multiplier equal to?

Narrowly defined, which of the following represents most of the M1+ money supply?

Liquidity refers to the ease with which an asset can be converted into the medium of exchange without a significant loss of value.Which of the following assets is the least liquid?

Suppose the desired reserve ratio is 20 percent.And suppose the Bank of Canada injects $10,000 of new excess reserves.What will this injection create, assuming no bank holds excess reserves and nobody withdraws cash?

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

Which of the following is NOT among the assets of a chartered bank?

Consider a policy that increases the required reserve ratio in countries such as the United States.What type of policy is this?

Which of the following defines the M1+ money supply?

How do banks act as financial intermediaries?

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 best describes the use of credit cards?

Assume the banking system has no excess reserves, but the desired reserve is 20 percent.Suppose the Bank of Canada purchases $10,000 in Canadian government securities from the Academy National Bank.What is the ultimate potential increase in the money supply?

Which of the following is NOT an activity of the Bank of Canada?

Which of the following does liquidity NOT contribute to?

Consider the following money supplies: currency and coins held by the nonbanking public; and traveller's cheques and chequable deposits held at chartered banks, trust and mortgage loan companies, credit unions, and caisses populaires.Which money aggregate do these supplies belong to?

When a chartered bank sells Canadian government securities to the Bank of Canada, what is the immediate effect on reserves?

Suppose the simple money multiplier is 5.What must the desired reserve ratio be?

A bank finds itself short of desired reserves and therefore borrows from another chartered bank.What is the term for the interest rate on this loan?

Which of the following is a reason why banks differ from other types of businesses?

Which of the following is a liability for a bank?

Suppose a bank has $1 million in assets and $50,000 in net worth.What must its liabilities equal?

Suppose the desired reserve ratio is 15 percent.What is the simple money multiplier equal to?

Narrowly defined, which of the following represents most of the M1+ money supply?

Liquidity refers to the ease with which an asset can be converted into the medium of exchange without a significant loss of value.Which of the following assets is the least liquid?

Suppose the desired reserve ratio is 20 percent.And suppose the Bank of Canada injects $10,000 of new excess reserves.What will this injection create, assuming no bank holds excess reserves and nobody withdraws cash?

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

Which of the following is NOT among the assets of a chartered bank?

Consider a policy that increases the required reserve ratio in countries such as the United States.What type of policy is this?

Which of the following defines the M1+ money supply?

How do banks act as financial intermediaries?

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