Question 1

Which of the following is NOT a reason why the velocity of money increases?

Accepted Answer

A)  because funds are transmitted electronically 
B)  because the use of charge accounts is increasing 
C)  because the use of automatic teller machines is increasing 
D)  because the use of credit cards decreasing 
A)  because funds are transmitted electronically 
B)  because the use of charge accounts is increasing 
C)  because the use of automatic teller machines is increasing 
D)  because the use of credit cards decreasing

Question 2

What is the primary reason for people to own or hold money?

Accepted Answer

A)  because money has a guaranteed nominal return 
B)  because money has a guaranteed real return 
C)  because money can be used directly to buy goods and services 
D)  because money functions as a unit of account 
A)  because money has a guaranteed nominal return 
B)  because money has a guaranteed real return 
C)  because money can be used directly to buy goods and services 
D)  because money functions as a unit of account

Question 3

Which of the following is an example of a contractionary monetary policy?

Accepted Answer

A)  Transfer payments to poor families are reduced. 
B)  The Bank of Canada buys government securities in the open market. 
C)  The bank rate is raised. 
D)  Government spending is reduced. 
A)  Transfer payments to poor families are reduced. 
B)  The Bank of Canada buys government securities in the open market. 
C)  The bank rate is raised. 
D)  Government spending is reduced.

Question 4

On which of the following does the Bank of Canada have the tightest grip?

Accepted Answer

A)  the prime rate 
B)  the overnight rate 
C)  the mortgage rate 
D)  the credit card rate 
A)  the prime rate 
B)  the overnight rate 
C)  the mortgage rate 
D)  the credit card rate

Question 5

Suppose the Bank of Canada sells government securities to banks.Which of the following best describes how planned investment will be affected?

Accepted Answer

A)  Planned investment will increase. 
B)  Planned investment will decrease. 
C)  Planned investment will remain the same. 
D)  Planned investment will first increase, and then decrease. 
A)  Planned investment will increase. 
B)  Planned investment will decrease. 
C)  Planned investment will remain the same. 
D)  Planned investment will first increase, and then decrease.

Question 6

Suppose the money supply increases.How is GDP affected?

Accepted Answer

A)  GDP increases because the resulting increase in the interest rate leads to a decrease in investment. 
B)  GDP increases because the resulting decrease in the interest rate leads to an increase in investment. 
C)  GDP decreases because the resulting increase in the interest rate leads to a decrease in investment. 
D)  GDP decreases because the resulting decrease in the interest rate leads to an increase in investment. 
A)  GDP increases because the resulting increase in the interest rate leads to a decrease in investment. 
B)  GDP increases because the resulting decrease in the interest rate leads to an increase in investment. 
C)  GDP decreases because the resulting increase in the interest rate leads to a decrease in investment. 
D)  GDP decreases because the resulting decrease in the interest rate leads to an increase in investment.

Question 7

Suppose the quantity of money supplied exceeds the quantity of money demanded.Which of the following best describes how the interest rate is affected?

Accepted Answer

A)  The interest rate will rise. 
B)  The interest rate will remain the same. 
C)  The interest rate will fall. 
D)  The interest rate will become negative. 
A)  The interest rate will rise. 
B)  The interest rate will remain the same. 
C)  The interest rate will fall. 
D)  The interest rate will become negative.

Question 8

Suppose the Bank of Canada increases the overnight rate.What are chartered banks likely to do?

Accepted Answer

A)  lower their prime rate 
B)  raise their prime interest rate 
C)  keep their prime lending rate the same 
D)  offset this change by lowering the interest rates they pay on savings deposits 
A)  lower their prime rate 
B)  raise their prime interest rate 
C)  keep their prime lending rate the same 
D)  offset this change by lowering the interest rates they pay on savings deposits

Question 9

Suppose money demand increases and the Bank of Canada does NOT alter its monetary policy.What will be the effect on interest rates?

Accepted Answer

A)  Interest rates will increase. 
B)  Interest rates will decrease. 
C)  Interest rates will remain the same. 
D)  Interest rates will first increase, and then decrease. 
A)  Interest rates will increase. 
B)  Interest rates will decrease. 
C)  Interest rates will remain the same. 
D)  Interest rates will first increase, and then decrease.

Question 10

Which of the following has the most influence on the supply of money?

Accepted Answer

A)  interest rates 
B)  prices 
C)  the transactions demand for money 
D)  the Bank of Canada 
A)  interest rates 
B)  prices 
C)  the transactions demand for money 
D)  the Bank of Canada

Which of the following is NOT a reason why the velocity of money increases?

What is the primary reason for people to own or hold money?

Which of the following is an example of a contractionary monetary policy?

On which of the following does the Bank of Canada have the tightest grip?

Suppose the Bank of Canada sells government securities to banks.Which of the following best describes how planned investment will be affected?

Suppose the money supply increases.How is GDP affected?

Suppose the quantity of money supplied exceeds the quantity of money demanded.Which of the following best describes how the interest rate is affected?

Suppose the Bank of Canada increases the overnight rate.What are chartered banks likely to do?

Suppose money demand increases and the Bank of Canada does NOT alter its monetary policy.What will be the effect on interest rates?

Which of the following has the most influence on the supply of money?

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

Banking and the Money Supply

Macro Policy Debate: Active or Passive

International Finance

International Trade

Economic Development

Understanding Graphs

Filters

Exam 15: Monetary Theory and Policy in an Open Economy

Which of the following is NOT a reason why the velocity of money increases?

What is the primary reason for people to own or hold money?

Which of the following is an example of a contractionary monetary policy?

On which of the following does the Bank of Canada have the tightest grip?

Suppose the Bank of Canada sells government securities to banks.Which of the following best describes how planned investment will be affected?

Suppose the money supply increases.How is GDP affected?

Suppose the quantity of money supplied exceeds the quantity of money demanded.Which of the following best describes how the interest rate is affected?

Suppose the Bank of Canada increases the overnight rate.What are chartered banks likely to do?

Suppose money demand increases and the Bank of Canada does NOT alter its monetary policy.What will be the effect on interest rates?

Which of the following has the most influence on the supply of money?

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

Banking and the Money Supply

Macro Policy Debate: Active or Passive

International Finance

International Trade

Economic Development

Understanding Graphs

Filters