Question 1

If the reserve ratio is 10 percent, how much new money can $1000 of excess reserves create?

Accepted Answer

A) $100 
B) $1000 
C) $10 000 
D) $100 000 
A) $100 
B) $1000 
C) $10 000 
D) $100 000

Question 2

If the reserve ratio increased from 10 percent to 20 percent, which of the following would happen to the money multiplier?

Accepted Answer

A) It would rise from10 to 20. 
B) It would rise from 5 to 10. 
C) It would fall from 10 to 5. 
D) It would not change. 
A) It would rise from10 to 20. 
B) It would rise from 5 to 10. 
C) It would fall from 10 to 5. 
D) It would not change.

Question 3

On which of the following do the Bank of Canada's policy decisions have an important influence?

Accepted Answer

A) both the rate of inflation and the level of employment in the short run 
B) the rate of inflation in the long run and the level of employment in the short run 
C) the rate of inflation in the short run and the level of employment in the long run 
D) both the rate of inflation and the level of employment in both the short run and the long run 
A) both the rate of inflation and the level of employment in the short run 
B) the rate of inflation in the long run and the level of employment in the short run 
C) the rate of inflation in the short run and the level of employment in the long run 
D) both the rate of inflation and the level of employment in both the short run and the long run

Question 4

Suppose that the reserve ratio is 7 percent and that a bank has $2000 in deposits. What are its required reserves?

Accepted Answer

A) $100 
B) $120 
C) $140 
D) $160 
A) $100 
B) $120 
C) $140 
D) $160

Question 5

What is the difference between the reserve ratio and the reserve requirement? Which is generally larger?

Accepted Answer

The reserve ratio is the percent of depo

Question 6

Suppose the banking system has $10 million in reserves, the reserve requirement is 20 percent, and there are no excess reserves. The public holds $10 million in cash. Then bankers decide that it is prudent to hold some excess reserves, and so begin to hold 25 percent of deposits in the form of reserves. At the same time, the public decides to withdraw $5 million in currency from the banking system. Other things the same, what will these actions cause the money supply to do?

Accepted Answer

A) to change forms, but not size 
B) to fall by $10 million 
C) to fall by $25 million 
D) to fall by $35 million 
A) to change forms, but not size 
B) to fall by $10 million 
C) to fall by $25 million 
D) to fall by $35 million

Question 7

How are savings deposits treated in M1 as compared to M2?

Accepted Answer

A) They are included in M1 but not M2. 
B) They are included in M2 but not M1. 
C) They are included in M1 and M2. 
D) They are included in neither M1 nor M2. 
A) They are included in M1 but not M2. 
B) They are included in M2 but not M1. 
C) They are included in M1 and M2. 
D) They are included in neither M1 nor M2.

Question 8

Table 29-5 The following information pertains to the Bank of Kingston.
  
-Refer to Table 29-5. Assume that all other banks hold only the required 4 percent of deposits as reserves, and that people hold only deposits and no currency. If the Bank of Kingston decides to hold reserves of 4 percent, by how much would the economy's money supply increase?

Accepted Answer

A) $50 200 
B) $60 000 
C) $62 000 
D) $65 400 
A) $50 200 
B) $60 000 
C) $62 000 
D) $65 400

Question 9

Which of the three functions of money are met by each of the following assets in the Canadian economy?
a.paper dollar
b.precious metals
c.collectibles such as baseball cards, stamps, and antiques

Accepted Answer

a.medium of exchange

Question 10

How could the Bank of Canada increase the money supply?

Accepted Answer

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

Question 11

As banks create money, they create wealth.

Accepted Answer

A) True 
 B)False

Question 12

How do deposits and reserves appear on a bank's T-account?

Accepted Answer

A) Both deposits and reserves are assets. 
B) Both deposits and reserves are liabilities. 
C) Deposits are assets and reserves are liabilities. 
D) Reserves are assets and deposits are liabilities. 
A) Both deposits and reserves are assets. 
B) Both deposits and reserves are liabilities. 
C) Deposits are assets and reserves are liabilities. 
D) Reserves are assets and deposits are liabilities.

Question 13

If the reserve ratio is 10 percent and a bank receives a new deposit of $800, which of the following will this bank most likely do?

Accepted Answer

A) It will increase its required reserves by $8000. 
B) It will make new loans of $8000. 
C) It will be able to make new loans of $800. 
D) It will initially see its total reserves increase by $800. 
A) It will increase its required reserves by $8000. 
B) It will make new loans of $8000. 
C) It will be able to make new loans of $800. 
D) It will initially see its total reserves increase by $800.

Question 14

Which of the following is current Canadian currency?

Accepted Answer

A) fiat money with intrinsic value 
B) fiat money with no intrinsic value 
C) commodity money with intrinsic value 
D) commodity money with no intrinsic value 
A) fiat money with intrinsic value 
B) fiat money with no intrinsic value 
C) commodity money with intrinsic value 
D) commodity money with no intrinsic value

Question 15

Which of the following is included in M2 but not in M1?

Accepted Answer

A) demand deposits 
B) corporate bonds 
C) currency 
D) term deposits 
A) demand deposits 
B) corporate bonds 
C) currency 
D) term deposits

Question 16

M2 is both larger and more liquid than M1.

Accepted Answer

A) True 
 B)False

Question 17

Use the balance sheet for the following questions.
Table 29-3
  
-Refer to Table 29-3. If the Last Bank of Cedar Bend is holding $5000 in excess reserves, what is the reserve requirement?

Accepted Answer

A) 1/7 
B) 1/8 
C) 1/9 
D) 1/10 
A) 1/7 
B) 1/8 
C) 1/9 
D) 1/10

Question 18

Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

Accepted Answer

A) True 
 B)False

Question 19

In a fractional reserve banking system, how does an increase in the reserve requirement change the money multiplier?

Accepted Answer

A) The money multiplier increases by a higher percentage change than the increase in the reserve ratio. 
B) The money multiplier decreases by a higher percentage change than the increase in the reserve ratio. 
C) The money multiplier increases by a lower percentage change than the increase in the reserve ratio. 
D) The money multiplier decreases by a lower percentage change than the increase in the reserve ratio. 
A) The money multiplier increases by a higher percentage change than the increase in the reserve ratio. 
B) The money multiplier decreases by a higher percentage change than the increase in the reserve ratio. 
C) The money multiplier increases by a lower percentage change than the increase in the reserve ratio. 
D) The money multiplier decreases by a lower percentage change than the increase in the reserve ratio.

Question 20

Which of the following is the fundamental function of credit cards?

Accepted Answer

A) Credit cards are used for deferring payments. 
B) Credit cards are used as store of value. 
C) Credit cards are used for increasing the money supply. 
D) Credit cards are used as investment assets. 
A) Credit cards are used for deferring payments. 
B) Credit cards are used as store of value. 
C) Credit cards are used for increasing the money supply. 
D) Credit cards are used as investment assets.

If the reserve ratio is 10 percent, how much new money can $1000 of excess reserves create?

If the reserve ratio increased from 10 percent to 20 percent, which of the following would happen to the money multiplier?

On which of the following do the Bank of Canada's policy decisions have an important influence?

Suppose that the reserve ratio is 7 percent and that a bank has $2000 in deposits. What are its required reserves?

What is the difference between the reserve ratio and the reserve requirement? Which is generally larger?

How are savings deposits treated in M1 as compared to M2?

Which of the three functions of money are met by each of the following assets in the Canadian economy? a.paper dollar b.precious metals c.collectibles such as baseball cards, stamps, and antiques

How could the Bank of Canada increase the money supply?

As banks create money, they create wealth.

How do deposits and reserves appear on a bank's T-account?

If the reserve ratio is 10 percent and a bank receives a new deposit of $800, which of the following will this bank most likely do?

Which of the following is current Canadian currency?

Which of the following is included in M2 but not in M1?

M2 is both larger and more liquid than M1.

Use the balance sheet for the following questions. Table 29-3 -Refer to Table 29-3. If the Last Bank of Cedar Bend is holding $5000 in excess reserves, what is the reserve requirement?

Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

In a fractional reserve banking system, how does an increase in the reserve requirement change the money multiplier?

Which of the following is the fundamental function of credit cards?

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

If the reserve ratio is 10 percent, how much new money can $1000 of excess reserves create?

If the reserve ratio increased from 10 percent to 20 percent, which of the following would happen to the money multiplier?

On which of the following do the Bank of Canada's policy decisions have an important influence?

Suppose that the reserve ratio is 7 percent and that a bank has $2000 in deposits. What are its required reserves?

What is the difference between the reserve ratio and the reserve requirement? Which is generally larger?

How are savings deposits treated in M1 as compared to M2?

Which of the three functions of money are met by each of the following assets in the Canadian economy? a.paper dollar b.precious metals c.collectibles such as baseball cards, stamps, and antiques

How could the Bank of Canada increase the money supply?

As banks create money, they create wealth.

How do deposits and reserves appear on a bank's T-account?

If the reserve ratio is 10 percent and a bank receives a new deposit of $800, which of the following will this bank most likely do?

Which of the following is current Canadian currency?

Which of the following is included in M2 but not in M1?

M2 is both larger and more liquid than M1.

Use the balance sheet for the following questions. Table 29-3 -Refer to Table 29-3. If the Last Bank of Cedar Bend is holding $5000 in excess reserves, what is the reserve requirement?

Marc puts prices on surfboards and skateboards at his sporting goods store. He is using money as a unit of account.

In a fractional reserve banking system, how does an increase in the reserve requirement change the money multiplier?

Which of the following is the fundamental function of credit cards?

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