Exam 10: Money, Banks, and the Bank of Canada

Suppose you transfer $2,000 from your non-money market mutual fund account to your chequing account.What is the immediate impact of this transfer on M1+ and M2++?

Free

(Essay)

4.9/5

(31)

Question 1

Correct Answer:

Verified

Mutual fund balances are part of M2++, but are not part of M1+.Chequing account balances are included in both money supply measures.Thus, M1+ will increase by $2,000 with the increase in your chequing account balance.M2++ will not change, as the $2,000 increase in your chequing account balance is offset by the $2,000 decrease in mutual fund accounts.

A bank's reserves equal its

Free

(Multiple Choice)

4.8/5

(32)

Question 2

Correct Answer:

Verified

According to the quantity theory of money, if the money supply grows at 20 percent and real GDP grows at 5 percent, then the inflation rate will be

Free

(Multiple Choice)

4.8/5

(38)

Question 3

Correct Answer:

Verified

Which of the following is not a reason why the Bank of Canada conducts monetary policy principally through open market operations?

(Multiple Choice)

4.8/5

(42)

Question 4

Banks will continue to make loans until their

(Multiple Choice)

4.7/5

(30)

Question 5

Although gold is highly valued by most people, it is difficult to use as a medium of exchange.Explain.

(Essay)

4.9/5

(37)

Question 6

Using the quantity equation, if the velocity of money grows at 5 percent, the money supply grows at 10 percent, and real GDP grows at 4 percent, then the inflation rate will be

(Multiple Choice)

4.9/5

(38)

Question 7

In Canada, currency includes

(Multiple Choice)

4.7/5

(29)

Question 8

An increase in the purchasing power of money need not lead to an increase in the purchasing power of income, because the falling price level would likely mean falling wages and salaries.

(True/False)

4.7/5

(36)

Question 9

If the Bank of Canada wants to decrease the money supply through open market operations, it will

(Multiple Choice)

4.9/5

(17)

Question 10

Suppose a bank has $100 million in chequing account deposits with no excess reserves and the desired reserve ratio is 10 percent.If commercial banks reduce the desired reserve ratio to 4 percent, then the bank can make a maximum loan of

(Multiple Choice)

4.8/5

(30)

Question 11

A cash withdrawal reduces deposits, reserves, and excess reserves in the banking system.

(True/False)

4.8/5

(35)

Question 12

If the desired reserve ratio is 10 percent, an increase in bank reserves of $1,000 can support an increase in chequing account deposits (including the original deposit)in the banking system as a whole of up to

(Multiple Choice)

4.9/5

(32)

Question 13

Which of the following describes the degree of control that the Bank of Canada has over the money supply?

(Multiple Choice)

4.8/5

(31)

Question 14

How effective is the overnight interest rate as compared to open market operations in managing the money supply? Explain how the Bank of Canada uses overnight interest rate today.

(Essay)

4.8/5

(30)

Question 15

Suppose that the bank has the following balance sheet: If the desired reserve ratio is 10 percent, what is the maximum the bank can loan out? Suppose the bank makes this loan and the borrower spends the money, which is deposited in a different bank.Show the impact of these transactions on the bank's balance sheet.

(Essay)

4.9/5

(33)

Question 16

The major assets on a bank's balance sheet are its

(Multiple Choice)

4.9/5

(36)

Question 17

The quantity theory of money predicts that, in the long run, inflation results from the

(Multiple Choice)

4.7/5

(31)

Question 18

For the purchasing power of money to increase, the price level has to fall.

(True/False)

4.9/5

(35)

Question 19

An economy without money would have no exchanges of goods and services.

(True/False)

4.8/5

(26)

Question 20

Showing 1 - 20 of 285

Suppose you transfer $2,000 from your non-money market mutual fund account to your chequing account.What is the immediate impact of this transfer on M1+ and M2++?

A bank's reserves equal its

According to the quantity theory of money, if the money supply grows at 20 percent and real GDP grows at 5 percent, then the inflation rate will be

Which of the following is not a reason why the Bank of Canada conducts monetary policy principally through open market operations?

Banks will continue to make loans until their

Although gold is highly valued by most people, it is difficult to use as a medium of exchange.Explain.

Using the quantity equation, if the velocity of money grows at 5 percent, the money supply grows at 10 percent, and real GDP grows at 4 percent, then the inflation rate will be

In Canada, currency includes

An increase in the purchasing power of money need not lead to an increase in the purchasing power of income, because the falling price level would likely mean falling wages and salaries.

If the Bank of Canada wants to decrease the money supply through open market operations, it will

Suppose a bank has $100 million in chequing account deposits with no excess reserves and the desired reserve ratio is 10 percent.If commercial banks reduce the desired reserve ratio to 4 percent, then the bank can make a maximum loan of

A cash withdrawal reduces deposits, reserves, and excess reserves in the banking system.

If the desired reserve ratio is 10 percent, an increase in bank reserves of $1,000 can support an increase in chequing account deposits (including the original deposit)in the banking system as a whole of up to

Which of the following describes the degree of control that the Bank of Canada has over the money supply?

How effective is the overnight interest rate as compared to open market operations in managing the money supply? Explain how the Bank of Canada uses overnight interest rate today.

The major assets on a bank's balance sheet are its

The quantity theory of money predicts that, in the long run, inflation results from the

For the purchasing power of money to increase, the price level has to fall.

An economy without money would have no exchanges of goods and services.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Supply and Demand

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Bank of Canada Policy

Macroeconomics in an Open Economy

The International Financial System

Filters