Question 1

Which of the following statements about the velocity of money is the most accurate?

Accepted Answer

A) It is inversely related to the rate of interest. 
B) It is the rate at which the Consumer Price Index rises. 
C) It is established by the Bank of Canada and, if needed, is adjusted four times a year. 
D) It is the average number of times that a dollar is used in purchasing goods and services. 
A) It is inversely related to the rate of interest. 
B) It is the rate at which the Consumer Price Index rises. 
C) It is established by the Bank of Canada and, if needed, is adjusted four times a year. 
D) It is the average number of times that a dollar is used in purchasing goods and services. D

Question 2

Explain the difference between the Ministry of Finance and the Bank of Canada.

Accepted Answer

The Ministry of Finance and the Bank of Canada are two distinct agencies.The Ministry of Finance is responsible for the federal budget.If there is a budget deficit,the Bank of Canada,as the government's fiscal agent,must sell bonds to the public to finance it.The Bank of Canada is also responsible for the stability of the monetary and credit system for the country.

Question 3

Which of the following is NOT a function of the Bank of Canada?

Accepted Answer

A) being a lender of last resort 
B) serving as a bank for the federal government 
C) issuing currency 
D) setting currency exchange rates 
A) being a lender of last resort 
B) serving as a bank for the federal government 
C) issuing currency 
D) setting currency exchange rates D

Question 4

What is the term for the Bank of Canada's purchases and sales of government securities?

Accepted Answer

A) small-dealer transactions 
B) margin operations 
C) intermediary transactions 
D) open market operations 
A) small-dealer transactions 
B) margin operations 
C) intermediary transactions 
D) open market operations

Question 5

Suppose the Bank of Canada sells $10 000 worth of bonds on the open market and the bank's desired reserve ratio is 5 percent,what will be the ultimate effect on the money supply?

Accepted Answer

A) It will increase by $200 000. 
B) It will decrease by $200 000. 
C) It will decrease by $10 500. 
D) It will increase by $10 500. 
A) It will increase by $200 000. 
B) It will decrease by $200 000. 
C) It will decrease by $10 500. 
D) It will increase by $10 500.

Question 6

Name four of the five primary functions of the Bank of Canada.

Accepted Answer

The five primary functions of a central

Question 7

If people expect increasing inflation,what change would you expect to see in the equation of exchange?

Accepted Answer

A) Velocity would be indeterminate. 
B) Velocity would be expected to stay the same. 
C) Velocity would be expected to increase. 
D) Velocity would be expected to decrease. 
A) Velocity would be indeterminate. 
B) Velocity would be expected to stay the same. 
C) Velocity would be expected to increase. 
D) Velocity would be expected to decrease.

Question 8

If the Bank of Canada buys a bond from an investment dealer,what is the effect on the money supply?

Accepted Answer

A) There is no effect from this action. 
B) The money supply will grow by smaller amounts than if the Bank of Canada bought from a bank. 
C) The money supply will be the same as if the Bank of Canada had bought the bond from a bank. 
D) The money supply will shrink. 
A) There is no effect from this action. 
B) The money supply will grow by smaller amounts than if the Bank of Canada bought from a bank. 
C) The money supply will be the same as if the Bank of Canada had bought the bond from a bank. 
D) The money supply will shrink.

Question 9

If the Bank of Canada sells a government bond to a member of the public,what impact does this have on the banking system reserves and the money supply?

Accepted Answer

A) The banking system has fewer reserves, and the money supply tends to fall. 
B) The banking system has more reserves, and the money supply tends to fall. 
C) The banking system has fewer reserves, and the money supply tends to grow. 
D) The banking system has more reserves, and the money supply tends to grow. 
A) The banking system has fewer reserves, and the money supply tends to fall. 
B) The banking system has more reserves, and the money supply tends to fall. 
C) The banking system has fewer reserves, and the money supply tends to grow. 
D) The banking system has more reserves, and the money supply tends to grow.

Question 10

What would constitute contractionary monetary policy by the Bank of Canada?

Accepted Answer

A) open market purchases of government securities and a cut in the bank rate 
B) an increase in tariffs on imported goods and a decrease in foreign aid 
C) an increase in income tax rates, a cut in government spending, and an elimination of the investment tax credit 
D) open market sales of government securities and an increase in the bank rate 
A) open market purchases of government securities and a cut in the bank rate 
B) an increase in tariffs on imported goods and a decrease in foreign aid 
C) an increase in income tax rates, a cut in government spending, and an elimination of the investment tax credit 
D) open market sales of government securities and an increase in the bank rate

Question 11

The interest rate that the Bank of Canada charges banks for borrowing funds is called the bank rate.

Accepted Answer

A) True 
 B)False

Question 12

When you write your rent cheque on your credit union account and your landlord deposits it in her account at the Bank of Montreal,what will be the impact in the banking system?

Accepted Answer

A) Chartered bank reserves will rise. 
B) Deposits at the Bank of Canada will fall. 
C) Deposits at the Bank of Canada will rise. 
D) M2 will increase and M2+ will fall. 
A) Chartered bank reserves will rise. 
B) Deposits at the Bank of Canada will fall. 
C) Deposits at the Bank of Canada will rise. 
D) M2 will increase and M2+ will fall.

Question 13

What action will the Bank of Canada take if it wishes to expand the money supply?

Accepted Answer

A) sell government bonds 
B) buy stocks 
C) buy government bonds 
D) sell stocks 
A) sell government bonds 
B) buy stocks 
C) buy government bonds 
D) sell stocks

Question 14

What is the equation of exchange?

Accepted Answer

A) the price level x the velocity of money = the money supply x the quantity of goods and services produced 
B) the money supply x the velocity of money = the price level x the quantity of goods and services produced 
C) government spending = taxes + the federal budget deficit 
D) the reciprocal of the desired reserve ratio = the deposit expansion multiplier 
A) the price level x the velocity of money = the money supply x the quantity of goods and services produced 
B) the money supply x the velocity of money = the price level x the quantity of goods and services produced 
C) government spending = taxes + the federal budget deficit 
D) the reciprocal of the desired reserve ratio = the deposit expansion multiplier

Question 15

Under what circumstances can real GDP rise at the same time money supply falls?

Accepted Answer

A) if the price level remains constant 
B) if the price level rises rapidly enough 
C) if velocity falls rapidly enough 
D) if velocity rises rapidly enough 
A) if the price level remains constant 
B) if the price level rises rapidly enough 
C) if velocity falls rapidly enough 
D) if velocity rises rapidly enough

Question 16

Velocity using the M2 measure of money is lower than velocity using the M2+ measure of money.

Accepted Answer

A) True 
 B)False

Question 17

If money supply increases,P will rise as long as V and Q remain constant.

Accepted Answer

A) True 
 B)False

Question 18

What is the most important objective of the Bank of Canada?

Accepted Answer

A) keeping the bank rate at between 1 percent and 3 percent 
B) keeping the unemployment rate at between 1 percent and 3 percent 
C) keeping the inflation rate at between 1 percent and 3 percent 
D) keeping the growth rate of the economy at between 1 percent and 3 percent 
A) keeping the bank rate at between 1 percent and 3 percent 
B) keeping the unemployment rate at between 1 percent and 3 percent 
C) keeping the inflation rate at between 1 percent and 3 percent 
D) keeping the growth rate of the economy at between 1 percent and 3 percent

Question 19

If the amount of money in circulation is $50 million and nominal GDP is $150 million,what is the velocity of money?

Accepted Answer

A) 0.33 
B) 2 
C) 3 
D) 5 
A) 0.33 
B) 2 
C) 3 
D) 5

Question 20

Countries with independent central banks tend to have lower inflation rates as well as lower economic growth rates.

Accepted Answer

A) True 
 B)False

Which of the following statements about the velocity of money is the most accurate?

Explain the difference between the Ministry of Finance and the Bank of Canada.

Which of the following is NOT a function of the Bank of Canada?

What is the term for the Bank of Canada's purchases and sales of government securities?

Suppose the Bank of Canada sells $10 000 worth of bonds on the open market and the bank's desired reserve ratio is 5 percent,what will be the ultimate effect on the money supply?

Name four of the five primary functions of the Bank of Canada.

If people expect increasing inflation,what change would you expect to see in the equation of exchange?

If the Bank of Canada buys a bond from an investment dealer,what is the effect on the money supply?

If the Bank of Canada sells a government bond to a member of the public,what impact does this have on the banking system reserves and the money supply?

What would constitute contractionary monetary policy by the Bank of Canada?

The interest rate that the Bank of Canada charges banks for borrowing funds is called the bank rate.

When you write your rent cheque on your credit union account and your landlord deposits it in her account at the Bank of Montreal,what will be the impact in the banking system?

What action will the Bank of Canada take if it wishes to expand the money supply?

What is the equation of exchange?

Under what circumstances can real GDP rise at the same time money supply falls?

Velocity using the M2 measure of money is lower than velocity using the M2+ measure of money.

If money supply increases,P will rise as long as V and Q remain constant.

What is the most important objective of the Bank of Canada?

If the amount of money in circulation is $50 million and nominal GDP is $150 million,what is the velocity of money?

Countries with independent central banks tend to have lower inflation rates as well as lower economic growth rates.

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Aggregate Supply and Macroeconomic Equilibrium

Fiscal Policy

Money and the Banking System

Monetary Policy

International Trade

International Finance

Filters

Exam 12: The Bank of Canada

Which of the following statements about the velocity of money is the most accurate?

Explain the difference between the Ministry of Finance and the Bank of Canada.

Which of the following is NOT a function of the Bank of Canada?

What is the term for the Bank of Canada's purchases and sales of government securities?

Suppose the Bank of Canada sells $10 000 worth of bonds on the open market and the bank's desired reserve ratio is 5 percent,what will be the ultimate effect on the money supply?

Name four of the five primary functions of the Bank of Canada.

If people expect increasing inflation,what change would you expect to see in the equation of exchange?

If the Bank of Canada buys a bond from an investment dealer,what is the effect on the money supply?

If the Bank of Canada sells a government bond to a member of the public,what impact does this have on the banking system reserves and the money supply?

What would constitute contractionary monetary policy by the Bank of Canada?

The interest rate that the Bank of Canada charges banks for borrowing funds is called the bank rate.

When you write your rent cheque on your credit union account and your landlord deposits it in her account at the Bank of Montreal,what will be the impact in the banking system?

What action will the Bank of Canada take if it wishes to expand the money supply?

What is the equation of exchange?

Under what circumstances can real GDP rise at the same time money supply falls?

Velocity using the M2 measure of money is lower than velocity using the M2+ measure of money.

If money supply increases,P will rise as long as V and Q remain constant.

What is the most important objective of the Bank of Canada?

If the amount of money in circulation is $50 million and nominal GDP is $150 million,what is the velocity of money?

Countries with independent central banks tend to have lower inflation rates as well as lower economic growth rates.

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Aggregate Supply and Macroeconomic Equilibrium

Fiscal Policy

Money and the Banking System

Monetary Policy

International Trade

International Finance

Filters