Question 1

What is the approximate amount of currency per person in Canada?

Accepted Answer

A) $275 
B) $858 
C) $1025 
D) $2052 
A) $275 
B) $858 
C) $1025 
D) $2052 D

Question 2

What is meant by the term "lender of last resort?" In what circumstances might the Bank of Canada be a lender of last resort?

Accepted Answer

A "lender of last resort" is a lender to those who cannot borrow anywhere else. The Bank might loan funds to a solvent bank that is experiencing a bank run and so doesn't have enough cash on hand to meet depositors' demands.

Question 3

Who determines the amount of money in the economy?

Accepted Answer

A) The Bank of Canada controls the money supply precisely. 
B) The amount of money in the economy does not depend on the behaviour of depositors. 
C) The amount of money in the economy depends in part on the behaviour of banks. 
D) The Minister of Finance determines the amount of money in the economy by law. 
A) The Bank of Canada controls the money supply precisely. 
B) The amount of money in the economy does not depend on the behaviour of depositors. 
C) The amount of money in the economy depends in part on the behaviour of banks. 
D) The Minister of Finance determines the amount of money in the economy by law. C

Question 4

How can the Bank of Canada increase the money supply?

Accepted Answer

A) by conducting open market sales and raising the bank rate 
B) by conducting open market sales and lowering the bank rate 
C) by conducting open market purchases and raising the bank rate 
D) by conducting open market purchases and lowering the bank rate 
A) by conducting open market sales and raising the bank rate 
B) by conducting open market sales and lowering the bank rate 
C) by conducting open market purchases and raising the bank rate 
D) by conducting open market purchases and lowering the bank rate

Question 5

What does the legal tender requirement imply?

Accepted Answer

A) People are more likely to accept the dollar as a medium of exchange. 
B) The government must hold enough gold to redeem all currency. 
C) People may not make trades with anything else. 
D) It is illegal to hold foreign currencies. 
A) People are more likely to accept the dollar as a medium of exchange. 
B) The government must hold enough gold to redeem all currency. 
C) People may not make trades with anything else. 
D) It is illegal to hold foreign currencies.

Question 6

Assume that banks do not hold excess reserves. The banking system has $50 million in reserves and has a reserve requirement of 10 percent. The public holds $20 million in currency. Then the public decides to withdraw $5 million in currency from the banking system. If the Bank of Canada wants to keep the money supply stable by changing the reserve requirement, then what will the new reserve requirement be?

Accepted Answer

A) 10 percent 
B) 9.1 percent 
C) 9 percent 
D) 8.1 percent 
A) 10 percent 
B) 9.1 percent 
C) 9 percent 
D) 8.1 percent

Question 7

Who chairs the Board of Directors of the Bank of Canada?

Accepted Answer

A) the Governor of the Bank of Canada 
B) the Prime Minister 
C) the Minister of Finance 
D) the Governor General 
A) the Governor of the Bank of Canada 
B) the Prime Minister 
C) the Minister of Finance 
D) the Governor General

Question 8

If you deposit $100 into a demand deposit at a bank, what does this action by itself do to the money supply?

Accepted Answer

A) It does not change the money supply. 
B) It increases the money supply. 
C) It decreases the money supply. 
D) It has an indeterminate effect on the money supply. 
A) It does not change the money supply. 
B) It increases the money supply. 
C) It decreases the money supply. 
D) It has an indeterminate effect on the money supply.

Question 9

The banking system has $20 million in reserves and has a reserve requirement of 20 percent. The public holds $20 million in currency. Bankers previously did not hold any excess reserves, but difficult economic times make them decide that it is prudent to hold 25 percent of deposits as reserves. At the same time, the public decides to deposit $6.7 million in currency into the banking system. Other things equal, what must the Bank of Canada do to bank reserves to keep the money supply the same?

Accepted Answer

A) reduce reserves by $6.7 million 
B) reduce reserves by $5 million 
C) increase reserves by $3 million 
D) No action by the Bank of Canada is necessary. 
A) reduce reserves by $6.7 million 
B) reduce reserves by $5 million 
C) increase reserves by $3 million 
D) No action by the Bank of Canada is necessary.

Question 10

Suppose that the reserve ratio is 5 percent and that a bank has $3000 in deposits. What are its required reserves?

Accepted Answer

A) $150 
B) $50 
C) $1500 
D) $500 
A) $150 
B) $50 
C) $1500 
D) $500

Question 11

The Bank of Canada is a privately operated commercial bank.

Accepted Answer

A) True 
 B)False

Question 12

Suppose a bank has a 20 percent reserve ratio, $2500 in deposits, and it loans out all it can, given the reserve ratio. Which of the following describes the bank's assets?

Accepted Answer

A) It has $50 in reserves and $$2500 in loans. 
B) It has $50 in reserves and $2450 in loans. 
C) It has $500 in reserves and $2000 in loans. 
D) It has $500 in reserves and $2500 in loans. 
A) It has $50 in reserves and $$2500 in loans. 
B) It has $50 in reserves and $2450 in loans. 
C) It has $500 in reserves and $2000 in loans. 
D) It has $500 in reserves and $2500 in loans.

Question 13

When the Bank of Canada wants to change the money supply, which of the following does it most frequently do?

Accepted Answer

A) It changes the bank rate. 
B) It changes the reserve requirement. 
C) It conducts open market operations. 
D) It changes the amount of transfers such as unemployment benefits, child allowances, or other social assistance payments. 
A) It changes the bank rate. 
B) It changes the reserve requirement. 
C) It conducts open market operations. 
D) It changes the amount of transfers such as unemployment benefits, child allowances, or other social assistance payments.

Question 14

The use of money allows trade to be roundabout.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is the function of debit cards?

Accepted Answer

A) They defer payments. 
B) They are equivalent to credit cards. 
C) They are included in M2. 
D) They are used as a method of payment. 
A) They defer payments. 
B) They are equivalent to credit cards. 
C) They are included in M2. 
D) They are used as a method of payment.

Question 16

The banking system has $20 million in reserves and has a reserve requirement of 20 percent. Bankers previously did not hold any excess reserves, but difficult economic times make them decide that it is prudent to hold 25 percent of deposits as reserves. Other things equal, by how much must the Bank of Canada increase bank reserves to keep the money supply the same?

Accepted Answer

A) $4 million 
B) $5 million 
C) $20 million 
D) No action by the Bank of Canada is necessary. 
A) $4 million 
B) $5 million 
C) $20 million 
D) No action by the Bank of Canada is necessary.

Question 17

Credit cards are not a medium of exchange and so are not important for analyzing the monetary system.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following best describes the consequences of an increase in reserve requirements?

Accepted Answer

A) The reserve ratio increases, the money multiplier increases, and the money supply increases. 
B) The reserve ratio increases, the money multiplier decreases, and the money supply decreases. 
C) The reserve ratio decreases, the money multiplier increases, and the money supply increases. 
D) The reserve ratio decreases, the money multiplier decreases, and the money supply increases. 
A) The reserve ratio increases, the money multiplier increases, and the money supply increases. 
B) The reserve ratio increases, the money multiplier decreases, and the money supply decreases. 
C) The reserve ratio decreases, the money multiplier increases, and the money supply increases. 
D) The reserve ratio decreases, the money multiplier decreases, and the money supply increases.

Question 19

When was the Bank of Canada Act first enacted?

Accepted Answer

A) 1935 
B) 1867 
C) 1984 
D) 1934 
A) 1935 
B) 1867 
C) 1984 
D) 1934

Question 20

Which of the following characterizes currency?

Accepted Answer

A) It has intrinsic value. 
B) It has no intrinsic value. 
C) It may be used as a medium of exchange but is not legal tender. 
D) It performs all the functions of money except providing a unit of account. 
A) It has intrinsic value. 
B) It has no intrinsic value. 
C) It may be used as a medium of exchange but is not legal tender. 
D) It performs all the functions of money except providing a unit of account.

What is the approximate amount of currency per person in Canada?

What is meant by the term "lender of last resort?" In what circumstances might the Bank of Canada be a lender of last resort?

Who determines the amount of money in the economy?

How can the Bank of Canada increase the money supply?

What does the legal tender requirement imply?

Who chairs the Board of Directors of the Bank of Canada?

If you deposit $100 into a demand deposit at a bank, what does this action by itself do to the money supply?

Suppose that the reserve ratio is 5 percent and that a bank has $3000 in deposits. What are its required reserves?

The Bank of Canada is a privately operated commercial bank.

Suppose a bank has a 20 percent reserve ratio, $2500 in deposits, and it loans out all it can, given the reserve ratio. Which of the following describes the bank's assets?

When the Bank of Canada wants to change the money supply, which of the following does it most frequently do?

The use of money allows trade to be roundabout.

Which of the following is the function of debit cards?

Credit cards are not a medium of exchange and so are not important for analyzing the monetary system.

Which of the following best describes the consequences of an increase in reserve requirements?

When was the Bank of Canada Act first enacted?

Which of the following characterizes currency?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 10: The Monetary System

What is the approximate amount of currency per person in Canada?

What is meant by the term "lender of last resort?" In what circumstances might the Bank of Canada be a lender of last resort?

Who determines the amount of money in the economy?

How can the Bank of Canada increase the money supply?

What does the legal tender requirement imply?

Who chairs the Board of Directors of the Bank of Canada?

If you deposit $100 into a demand deposit at a bank, what does this action by itself do to the money supply?

Suppose that the reserve ratio is 5 percent and that a bank has $3000 in deposits. What are its required reserves?

The Bank of Canada is a privately operated commercial bank.

Suppose a bank has a 20 percent reserve ratio, $2500 in deposits, and it loans out all it can, given the reserve ratio. Which of the following describes the bank's assets?

When the Bank of Canada wants to change the money supply, which of the following does it most frequently do?

The use of money allows trade to be roundabout.

Which of the following is the function of debit cards?

Credit cards are not a medium of exchange and so are not important for analyzing the monetary system.

Which of the following best describes the consequences of an increase in reserve requirements?

When was the Bank of Canada Act first enacted?

Which of the following characterizes currency?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters