Exam 10: The Monetary System

During wars, the public tends to hold relatively more currency and relatively fewer deposits. Which of the following best describes the effects of this increase in currency holdings?

If a central bank wanted to increase the money supply, which of the following would it most likely do?

Is there tradeoff between inflation and unemployment?

Which of the following lists contains only actions that increase the money supply?

What is the role of the Minister of Finance with respect to the Bank of Canada or the banking system?

Use the balance sheet for the following questions. Table 29-3 -Refer to Table 29-3. If the reserve requirement is 10 percent and then someone deposits $50 000 into the bank, what is the bank's reserve position?

Suppose a bank has $200 000 in deposits and $180 000 in loans. What is its reserve ratio?

In a fractional reserve banking system with no excess reserves and no currency holdings, suppose the central bank buys $100 million of bonds. Which of the following best describes the effects of this open market operation?

During recessions, banks typically choose to hold more excess reserves relative to their deposits. Which of the following best describes the effects of the increase in reserves?

Use the balance sheet for the following questions. Table 29-3 -Refer to Table 29-3. If the reserve requirement is 30 percent, what is this bank's reserve position?

Which of the following best illustrates the unit of account function of money?

Which of the following is a characteristic of paper money?

If the reserve ratio is 100 percent, how much will the money supply eventually increase if there is a deposit of $500 of paper money in a bank?

Suppose the value of bank notes issued by the Bank of Canada as of 31 December, 2009, was $56 billion, while the money supply (M2+) was about $1.3 trillion. a.Assuming that half of the bank note value is in the hands of the population and the other half in banks' reserves, what must have been the money multiplier? b.What is the average bank reserve ratio corresponding to the money multiplier calculated at point (b)? c.Now, let us assume that people hold one-tenth of their money (cash plus deposits) in cash and nine-tenths in bank deposits. With the reserve ratio calculated above, what is the value of the bank notes in the banks' reserves?d.What is the value of the bank notes in circulation, if the bank reserves are equal to the number you calculated c?

In order for currency to be widely used as a medium of exchange, it is sufficient for the government to designate it as legal tender.

Who appoints the members of the Board of Directors at the Bank of Canada?