Question 1

How are credit card balances 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 2

Which of the following best describes the consequences of an increase in the bank rate?

Accepted Answer

A) Banks will borrow more from Bank of Canada so reserves increase. 
B) Banks will borrow more from Bank of Canada so reserves decrease. 
C) Banks will borrow less from Bank of Canada so reserves increase. 
D) Banks will borrow less from Bank of Canada so reserves decrease. 
A) Banks will borrow more from Bank of Canada so reserves increase. 
B) Banks will borrow more from Bank of Canada so reserves decrease. 
C) Banks will borrow less from Bank of Canada so reserves increase. 
D) Banks will borrow less from Bank of Canada so reserves decrease.

Question 3

A central bank raised the reserve requirement ratio from 10 percent to 12 percent. Other things the same, how does the money multiplier change?

Accepted Answer

A) It increases by 1.67. 
B) It decreases by 1.67. 
C) It increases by about 2. 
D) It decreases by 2. 
A) It increases by 1.67. 
B) It decreases by 1.67. 
C) It increases by about 2. 
D) It decreases by 2.

Question 4

Table 29-4 The following information pertains to the Bank of Edmonton.
  
-Refer to Table 29-4. Assume that the Bank of Edmonton is holding the required percent of deposits as reserves. Also, assume all other banks hold only the required percent of deposits as reserves, and that people hold only deposits and no currency. What is the money multiplier?

Accepted Answer

A) 1 
B) 5 
C) 10 
D) 15 
A) 1 
B) 5 
C) 10 
D) 15

Question 5

Which of the following is not a tool of monetary policy?

Accepted Answer

A) open market operations 
B) reserve requirements 
C) changing the bank rate 
D) increasing the deficit 
A) open market operations 
B) reserve requirements 
C) changing the bank rate 
D) increasing the deficit

Question 6

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

Accepted Answer

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

Question 7

When the Soviet Union began breaking up in the late 1980s, cigarettes began replacing the ruble as the medium of exchange, even though the ruble was legal tender. The cigarettes provide an example of fiat money.

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. Assume that the Bank of Kingston is holding the required percent of deposits as reserves. Also, assume all other banks hold only the required percent of deposits as reserves. What is the money multiplier?

Accepted Answer

A) 12.5 
B) 15 
C) 17.5 
D) 20 
A) 12.5 
B) 15 
C) 17.5 
D) 20

Question 9

Describe the two things that limit the precision of the Bank of Canada's control of the money supply and explain how each limits that control.

Accepted Answer

First, the Bank of Canada does not contr

Question 10

If the central bank in some country lowered the reserve ratio, which of the following would happen to the money multiplier?

Accepted Answer

A) It would increase. 
B) It would not change. 
C) It would decrease. 
D) It cannot be determined without additional information. 
A) It would increase. 
B) It would not change. 
C) It would decrease. 
D) It cannot be determined without additional information.

Question 11

The money supply of Hooba is $10 000 under a 100 percent reserve banking system. If Hooba decreases the reserve requirement to 10 percent, the money supply could increase by no more than $9000.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following best describes bank runs today?

Accepted Answer

A) Bank runs are uncommon because of the high required reserve ratio. 
B) Bank runs are uncommon because of CDIC deposit insurance. 
C) Bank runs are common because of the low required reserve ratio. 
D) Bank runs are common because the CDIC is inefficient. 
A) Bank runs are uncommon because of the high required reserve ratio. 
B) Bank runs are uncommon because of CDIC deposit insurance. 
C) Bank runs are common because of the low required reserve ratio. 
D) Bank runs are common because the CDIC is inefficient.

Question 13

Which of the following best explains whether bank runs are a problem for the economy?

Accepted Answer

A) They are not a problem, because bank runs will affect neither the money supply nor the money multiplier. 
B) Bank runs are only a problem for insolvent banks. 
C) They are a problem, but they can be neither prevented nor stopped by a central bank. 
D) Bank runs are a problem because bank failures may spread to healthy banks. 
A) They are not a problem, because bank runs will affect neither the money supply nor the money multiplier. 
B) Bank runs are only a problem for insolvent banks. 
C) They are a problem, but they can be neither prevented nor stopped by a central bank. 
D) Bank runs are a problem because bank failures may spread to healthy banks.

Question 14

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

Accepted Answer

A) make open market purchases; raise the reserve requirement ratio 
B) make open market purchases; lower the reserve requirement ratio 
C) make open market sales; raise the reserve requirement ratio 
D) make open market sales; lower the reserve requirement ratio 
A) make open market purchases; raise the reserve requirement ratio 
B) make open market purchases; lower the reserve requirement ratio 
C) make open market sales; raise the reserve requirement ratio 
D) make open market sales; lower the reserve requirement ratio

Question 15

Which of the following is included in M1?

Accepted Answer

A) government bonds 
B) demand deposits 
C) savings deposits 
D) travellers' cheques 
A) government bonds 
B) demand deposits 
C) savings deposits 
D) travellers' cheques

Question 16

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

Accepted Answer

A) raise the bank rate; make open market purchases 
B) raise the bank rate; make open market sales 
C) lower the bank rate; make open market purchases 
D) lower the bank rate; make open market sales 
A) raise the bank rate; make open market purchases 
B) raise the bank rate; make open market sales 
C) lower the bank rate; make open market purchases 
D) lower the bank rate; make open market sales

Question 17

Which of the following lists ranks assets from most to least liquid?

Accepted Answer

A) currency, fine art, stocks 
B) currency, stocks, fine art 
C) fine art, currency, stocks 
D) fine art, stocks, currency 
A) currency, fine art, stocks 
B) currency, stocks, fine art 
C) fine art, currency, stocks 
D) fine art, stocks, currency

Question 18

In order to support the Canadian dollar, suppose the Bank of Canada buys an amount of Euros from some major commercial Canadian banks (a type of operation the Bank of Canada rarely undertakes).
a.What is the immediate and the longer term impact of this operation on the money supply?
b.If the Bank of Canada does not wish that the currency swap influence the money supply, what does it have to do?

Accepted Answer

a.Since the purchase is from major comme

Question 19

What is the interest rate the Bank of Canada charges on loans it makes to banks?

Accepted Answer

A) the prime rate 
B) the federal funds rate 
C) the bank rate 
D) the operating band 
A) the prime rate 
B) the federal funds rate 
C) the bank rate 
D) the operating band

Question 20

Suppose the reserve ratio is 10 percent, banks do not hold excess reserves, people do not hold currency, and the Bank of Canada purchases $20 million of government bonds. Which of the following best describes the effects of Bank of Canada's purchase?

Accepted Answer

A) Bank reserves increase by $20 million, and the money supply eventually increases by $200 million. 
B) Bank reserves decrease by $20 million, and the money supply eventually increases by $200 million. 
C) Bank reserves increase by $20 million, and the money supply eventually decreases by $200 million. 
D) Bank reserves decrease by $20 million, and the money supply eventually decreases by $200 million. 
A) Bank reserves increase by $20 million, and the money supply eventually increases by $200 million. 
B) Bank reserves decrease by $20 million, and the money supply eventually increases by $200 million. 
C) Bank reserves increase by $20 million, and the money supply eventually decreases by $200 million. 
D) Bank reserves decrease by $20 million, and the money supply eventually decreases by $200 million.

How are credit card balances treated in M1 as compared to M2?

Which of the following best describes the consequences of an increase in the bank rate?

A central bank raised the reserve requirement ratio from 10 percent to 12 percent. Other things the same, how does the money multiplier change?

Which of the following is not a tool of monetary policy?

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

When the Soviet Union began breaking up in the late 1980s, cigarettes began replacing the ruble as the medium of exchange, even though the ruble was legal tender. The cigarettes provide an example of fiat money.

Table 29-5 The following information pertains to the Bank of Kingston. -Refer to Table 29-5. Assume that the Bank of Kingston is holding the required percent of deposits as reserves. Also, assume all other banks hold only the required percent of deposits as reserves. What is the money multiplier?

Describe the two things that limit the precision of the Bank of Canada's control of the money supply and explain how each limits that control.

If the central bank in some country lowered the reserve ratio, which of the following would happen to the money multiplier?

The money supply of Hooba is $10 000 under a 100 percent reserve banking system. If Hooba decreases the reserve requirement to 10 percent, the money supply could increase by no more than $9000.

Which of the following best describes bank runs today?

Which of the following best explains whether bank runs are a problem for the economy?

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

Which of the following is included in M1?

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

Which of the following lists ranks assets from most to least liquid?

What is the interest rate the Bank of Canada charges on loans it makes to banks?

Suppose the reserve ratio is 10 percent, banks do not hold excess reserves, people do not hold currency, and the Bank of Canada purchases $20 million of government bonds. Which of the following best describes the effects of Bank of Canada's purchase?

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

How are credit card balances treated in M1 as compared to M2?

Which of the following best describes the consequences of an increase in the bank rate?

A central bank raised the reserve requirement ratio from 10 percent to 12 percent. Other things the same, how does the money multiplier change?

Which of the following is not a tool of monetary policy?

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

When the Soviet Union began breaking up in the late 1980s, cigarettes began replacing the ruble as the medium of exchange, even though the ruble was legal tender. The cigarettes provide an example of fiat money.

Table 29-5 The following information pertains to the Bank of Kingston. -Refer to Table 29-5. Assume that the Bank of Kingston is holding the required percent of deposits as reserves. Also, assume all other banks hold only the required percent of deposits as reserves. What is the money multiplier?

Describe the two things that limit the precision of the Bank of Canada's control of the money supply and explain how each limits that control.

If the central bank in some country lowered the reserve ratio, which of the following would happen to the money multiplier?

The money supply of Hooba is $10 000 under a 100 percent reserve banking system. If Hooba decreases the reserve requirement to 10 percent, the money supply could increase by no more than $9000.

Which of the following best describes bank runs today?

Which of the following best explains whether bank runs are a problem for the economy?

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

Which of the following is included in M1?

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

Which of the following lists ranks assets from most to least liquid?

What is the interest rate the Bank of Canada charges on loans it makes to banks?

Suppose the reserve ratio is 10 percent, banks do not hold excess reserves, people do not hold currency, and the Bank of Canada purchases $20 million of government bonds. Which of the following best describes the effects of Bank of Canada's purchase?

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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