Question 1

For how long is the governor of the Bank of Canada appointed?

Accepted Answer

A) life 
B) a seven-year term 
C) a five-year term 
D) a two-year term 
A) life 
B) a seven-year term 
C) a five-year term 
D) a two-year term

Question 2

To increase the money supply, which of the following could the Bank of Canada do?

Accepted Answer

A) sell government bonds 
B) increase the bank rate 
C) decrease the reserve requirement 
D) decrease the money multiplier 
A) sell government bonds 
B) increase the bank rate 
C) decrease the reserve requirement 
D) decrease the money multiplier

Question 3

At one time, the country of Sylvania had no banks, but had currency of $10 million. Then a banking system was established with a reserve requirement of 20 percent. The people of Sylvania now keep half their money in the form of currency and half in the form of bank deposits. If banks do not hold excess reserves, how much currency do the people of Sylvania now hold?

Accepted Answer

A) $2 million 
B) $5 million 
C) $8.33 million 
D) $9.09 million 
A) $2 million 
B) $5 million 
C) $8.33 million 
D) $9.09 million

Question 4

Which of the following characterizes fiat money?

Accepted Answer

A) It has no intrinsic value. 
B) It is backed by gold. 
C) It has intrinsic value equal to its value in exchange. 
D) It is an illiquid asset. 
A) It has no intrinsic value. 
B) It is backed by gold. 
C) It has intrinsic value equal to its value in exchange. 
D) It is an illiquid asset.

Question 5

Suppose Heather receives a payment in cash of $400 and she deposits it in a bank.
a.If the banking system is 100 percent reserve, how does the money supply change?
b.If the reserve requirement is 10 percent and the bank holds no excess reserve, how does the money supply change?
c.If the reserve requirement is 10 percent and the bank holds an excess reserve of 2 percent, how does the money supply change?

Accepted Answer

a.Since the $400 had been in circulation

Question 6

Which of the following explains the role of the Canadian Deposit Insurance Corporation (CDIC)?

Accepted Answer

A) The CDIC protects depositors in the event of bank failures. 
B) The CDIC routinely makes overnight loans to banks. 
C) The CDIC determines the bank rate. 
D) The CDIC determines the reserve requirement. 
A) The CDIC protects depositors in the event of bank failures. 
B) The CDIC routinely makes overnight loans to banks. 
C) The CDIC determines the bank rate. 
D) The CDIC determines the reserve requirement.

Question 7

The Bank of Canada is run by the Board of Directors, who are appointed by the minister of Finance.

Accepted Answer

A) True 
 B)False

Question 8

Table 29-5 The following information pertains to the Bank of Kingston.
  
-Refer to Table 29-5. If the Bank of Canada requires a reserve ratio of 4 percent, how much in excess reserves does the Bank of Kingston now hold?

Accepted Answer

A) $1200 
B) $2400 
C) $2880 
D) $3000 
A) $1200 
B) $2400 
C) $2880 
D) $3000

Question 9

If the reserve ratio is 10 percent and a bank receives a new deposit of $20, which of the following happens to this bank's reserves or deposits?

Accepted Answer

A) Required reserves must increase by $2. 
B) Total reserves will increase by $2. 
C) New loans can be made up to a maximum of $2. 
D) Total reserves increase by $200. 
A) Required reserves must increase by $2. 
B) Total reserves will increase by $2. 
C) New loans can be made up to a maximum of $2. 
D) Total reserves increase by $200.

Question 10

How does currency contribute to the money supply?

Accepted Answer

A) Currency held by the public and by banks is part of the money supply. 
B) Currency held by the public is part of the money supply, but currency held by banks is not. 
C) Currency held by the public is not part of the money supply, but currency held by banks is. 
D) Currency held by the public or banks is not part of the money supply since it is not included in M1. 
A) Currency held by the public and by banks is part of the money supply. 
B) Currency held by the public is part of the money supply, but currency held by banks is not. 
C) Currency held by the public is not part of the money supply, but currency held by banks is. 
D) Currency held by the public or banks is not part of the money supply since it is not included in M1.

Question 11

An increase in reserve requirements raises the reserve ratio and decreases the money supply.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following best describes the process of open market purchases conducted by the Bank of Canada?

Accepted Answer

A) The Bank of Canada buys Treasury bills, which increases the money supply. 
B) The Bank of Canada buys Treasury bills, which decreases the money supply. 
C) The Bank of Canada borrows from member banks, which increases the money supply. 
D) The Bank of Canada lends money to member banks, which decreases the money supply. 
A) The Bank of Canada buys Treasury bills, which increases the money supply. 
B) The Bank of Canada buys Treasury bills, which decreases the money supply. 
C) The Bank of Canada borrows from member banks, which increases the money supply. 
D) The Bank of Canada lends money to member banks, which decreases the money supply.

Question 13

Which of the following agencies is responsible for regulating the money supply in Canada?

Accepted Answer

A) the Comptroller of the Currency 
B) the Bank of Canada 
C) the TD Bank 
D) the Canadian Payments Association 
A) the Comptroller of the Currency 
B) the Bank of Canada 
C) the TD Bank 
D) the Canadian Payments Association

Question 14

Which of the following does the Bank of Canada NOT do?

Accepted Answer

A) control the supply of money 
B) control the value of money 
C) make loans to individuals 
D) regulate the banking system 
A) control the supply of money 
B) control the value of money 
C) make loans to individuals 
D) regulate the banking system

Question 15

What is the difference between commodity money and fiat money? Why do people accept fiat currency in trade for goods and services?

Accepted Answer

Commodity money has "intrinsic value," o

Question 16

Which of the following best illustrates the medium of exchange function of money?

Accepted Answer

A) You keep some money hidden in your shoe. 
B) You keep track of the value of your assets in terms of currency. 
C) You pay for your double latte using currency. 
D) You lend $25 to your friend. 
A) You keep some money hidden in your shoe. 
B) You keep track of the value of your assets in terms of currency. 
C) You pay for your double latte using currency. 
D) You lend $25 to your friend.

Question 17

In the nineteenth century when there were often bank runs caused by crop failures, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, which of the following actions should the banks have done?

Accepted Answer

A) They should have increased both the money multiplier and the money supply. 
B) They should have decreased the money multiplier and increased the money supply. 
C) They should have increased the money multiplier and decreased the money supply. 
D) They should have decreased both the money multiplier and the money supply. 
A) They should have increased both the money multiplier and the money supply. 
B) They should have decreased the money multiplier and increased the money supply. 
C) They should have increased the money multiplier and decreased the money supply. 
D) They should have decreased both the money multiplier and the money supply.

Question 18

If the reserve ratio is 20 percent, how much money can be created from $100 of reserves? Show your work.

Accepted Answer

(1/.20) *

Question 19

Use the balance sheet below for the following questions.
Table 29-2
  
-Refer to Table 29-2. What is the reserve ratio?

Accepted Answer

A) 0 percent 
B) 20 percent 
C) 80 percent 
D) 100 percent 
A) 0 percent 
B) 20 percent 
C) 80 percent 
D) 100 percent

Question 20

Which of the following best describes the consequences of open market purchases conducted by the Bank of Canada?

Accepted Answer

A) Bank reserves increase and the money supply increases. 
B) Bank reserves increase and the money supply decreases. 
C) The Bank of Canada borrows from member banks, which increases the money supply. 
D) The Bank of Canada lends money to member banks, which decreases the money supply. 
A) Bank reserves increase and the money supply increases. 
B) Bank reserves increase and the money supply decreases. 
C) The Bank of Canada borrows from member banks, which increases the money supply. 
D) The Bank of Canada lends money to member banks, which decreases the money supply.

For how long is the governor of the Bank of Canada appointed?

To increase the money supply, which of the following could the Bank of Canada do?

Which of the following characterizes fiat money?

Which of the following explains the role of the Canadian Deposit Insurance Corporation (CDIC)?

The Bank of Canada is run by the Board of Directors, who are appointed by the minister of Finance.

Table 29-5 The following information pertains to the Bank of Kingston. -Refer to Table 29-5. If the Bank of Canada requires a reserve ratio of 4 percent, how much in excess reserves does the Bank of Kingston now hold?

If the reserve ratio is 10 percent and a bank receives a new deposit of $20, which of the following happens to this bank's reserves or deposits?

How does currency contribute to the money supply?

An increase in reserve requirements raises the reserve ratio and decreases the money supply.

Which of the following best describes the process of open market purchases conducted by the Bank of Canada?

Which of the following agencies is responsible for regulating the money supply in Canada?

Which of the following does the Bank of Canada NOT do?

What is the difference between commodity money and fiat money? Why do people accept fiat currency in trade for goods and services?

Which of the following best illustrates the medium of exchange function of money?

In the nineteenth century when there were often bank runs caused by crop failures, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, which of the following actions should the banks have done?

If the reserve ratio is 20 percent, how much money can be created from $100 of reserves? Show your work.

Use the balance sheet below for the following questions. Table 29-2 -Refer to Table 29-2. What is the reserve ratio?

Which of the following best describes the consequences of open market purchases conducted by the Bank of Canada?

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

For how long is the governor of the Bank of Canada appointed?

To increase the money supply, which of the following could the Bank of Canada do?

Which of the following characterizes fiat money?

Which of the following explains the role of the Canadian Deposit Insurance Corporation (CDIC)?

The Bank of Canada is run by the Board of Directors, who are appointed by the minister of Finance.

Table 29-5 The following information pertains to the Bank of Kingston. -Refer to Table 29-5. If the Bank of Canada requires a reserve ratio of 4 percent, how much in excess reserves does the Bank of Kingston now hold?

If the reserve ratio is 10 percent and a bank receives a new deposit of $20, which of the following happens to this bank's reserves or deposits?

How does currency contribute to the money supply?

An increase in reserve requirements raises the reserve ratio and decreases the money supply.

Which of the following best describes the process of open market purchases conducted by the Bank of Canada?

Which of the following agencies is responsible for regulating the money supply in Canada?

Which of the following does the Bank of Canada NOT do?

What is the difference between commodity money and fiat money? Why do people accept fiat currency in trade for goods and services?

Which of the following best illustrates the medium of exchange function of money?

In the nineteenth century when there were often bank runs caused by crop failures, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, which of the following actions should the banks have done?

If the reserve ratio is 20 percent, how much money can be created from $100 of reserves? Show your work.

Use the balance sheet below for the following questions. Table 29-2 -Refer to Table 29-2. What is the reserve ratio?

Which of the following best describes the consequences of open market purchases conducted by the Bank of Canada?

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