Question 1

To implement the Friedman rule for long-term monetary policy,the monetary authority would need to set the

Accepted Answer

A)  inflation rate equal to zero. 
B)  nominal rate of interest equal to zero. 
C)  real rate of interest equal to zero. 
D)  money growth rate equal to zero. 
E)  output growth rate equal the inflation rate. 
A)  inflation rate equal to zero. 
B)  nominal rate of interest equal to zero. 
C)  real rate of interest equal to zero. 
D)  money growth rate equal to zero. 
E)  output growth rate equal the inflation rate. B

Question 2

In Canadian history,use of a commodity-backed paper currency is associated with the

Accepted Answer

A)  free banking era. 
B)  Second World War. 
C)  gold standard. 
D)  Bretton Woods agreement. 
E)  the Great Depression. 
A)  free banking era. 
B)  Second World War. 
C)  gold standard. 
D)  Bretton Woods agreement. 
E)  the Great Depression. C

Question 3

A depository institution can make highly illiquid and long-maturity loans with funds obtained by issuing transaction deposits because

Accepted Answer

A)  depository institutions tend to be owned by individuals with a high tolerance of risk. 
B)  most transaction depositors have very transaction patterns. 
C)  depositors, taken as a group, behave in a predictable manner. 
D)  depository institutions are skilled at evaluating credit risks. 
E)  depository institutions have a large pool of assets to draw from. 
A)  depository institutions tend to be owned by individuals with a high tolerance of risk. 
B)  most transaction depositors have very transaction patterns. 
C)  depositors, taken as a group, behave in a predictable manner. 
D)  depository institutions are skilled at evaluating credit risks. 
E)  depository institutions have a large pool of assets to draw from. C

Question 4

Circulating private bank notes

Accepted Answer

A)  have never been used in Canada. 
B)  were widely used in Canada prior to 1935. 
C)  were only widely used in Canada during the Great Depression. 
D)  are still currently in use in Canada. 
E)  were only widely used in Canada after World War II. 
A)  have never been used in Canada. 
B)  were widely used in Canada prior to 1935. 
C)  were only widely used in Canada during the Great Depression. 
D)  are still currently in use in Canada. 
E)  were only widely used in Canada after World War II.

Question 5

A system that uses commodity-backed paper currency is most like a system that

Accepted Answer

A)  uses circulating private bank notes. 
B)  uses fiat money. 
C)  primarily relies on transaction deposits at banks. 
D)  uses commodity money. 
E)  primarily relied on financial intermediaries. 
A)  uses circulating private bank notes. 
B)  uses fiat money. 
C)  primarily relies on transaction deposits at banks. 
D)  uses commodity money. 
E)  primarily relied on financial intermediaries.

Question 6

Fiat money

Accepted Answer

A)  consists of pieces of paper that are essentially worthless. 
B)  consists of pieces of paper that are essentially worth more than the paper it is printed on. 
C)  is not accepted in the exchange for goods. 
D)  is not accepted in the foreign exchange market. 
E)  consists of coins issued by the Bank of Canada. 
A)  consists of pieces of paper that are essentially worthless. 
B)  consists of pieces of paper that are essentially worth more than the paper it is printed on. 
C)  is not accepted in the exchange for goods. 
D)  is not accepted in the foreign exchange market. 
E)  consists of coins issued by the Bank of Canada.

Question 7

The causal link between money growth and inflation is most closely associated with

Accepted Answer

A)  Jevons. 
B)  Kiyotaki and Wright. 
C)  Friedman and Schwartz. 
D)  Diamond and Dybvig. 
E)  Kydland and Prescott. 
A)  Jevons. 
B)  Kiyotaki and Wright. 
C)  Friedman and Schwartz. 
D)  Diamond and Dybvig. 
E)  Kydland and Prescott.

Question 8

An increase in the inflation rate shifts the labour

Accepted Answer

A)  supply curve to the right. 
B)  supply curve to the left. 
C)  demand curve to the right. 
D)  demand curve to the left. 
E)  supply curve to the left and the output supply curve to the right. 
A)  supply curve to the right. 
B)  supply curve to the left. 
C)  demand curve to the right. 
D)  demand curve to the left. 
E)  supply curve to the left and the output supply curve to the right.

Question 9

A credit default swap is

Accepted Answer

A)  insurance on a debt contract. 
B)  not relevant for holders of mortgage backed securities. 
C)  a primary function of financial intermediaries. 
D)  a claim to the payoffs on a portfolio of mortgages. 
E)  insurance for consumers against the risk of defaulting on their mortgages. 
A)  insurance on a debt contract. 
B)  not relevant for holders of mortgage backed securities. 
C)  a primary function of financial intermediaries. 
D)  a claim to the payoffs on a portfolio of mortgages. 
E)  insurance for consumers against the risk of defaulting on their mortgages.

Question 10

If an increase in the growth rate of the money supply results in an equal increase in the rate of inflation with no effect on any real variables,we say that

Accepted Answer

A)  the classical dichotomy fails. 
B)  money is neutral. 
C)  money is superneutral. 
D)  money is the most preferred store of value. 
E)  money is not neutral. 
A)  the classical dichotomy fails. 
B)  money is neutral. 
C)  money is superneutral. 
D)  money is the most preferred store of value. 
E)  money is not neutral.

Question 11

In comparing the U.S.and Canadian banking systems,on an average per capita basis,Canada has

Accepted Answer

A)  fewer banks, but each bank has more branches. 
B)  more banks and each bank has more branches. 
C)  more banks, but each bank has fewer branches. 
D)  fewer banks and each bank has fewer branches. 
E)  fewer and smaller banks. 
A)  fewer banks, but each bank has more branches. 
B)  more banks and each bank has more branches. 
C)  more banks, but each bank has fewer branches. 
D)  fewer banks and each bank has fewer branches. 
E)  fewer and smaller banks.

Question 12

An asset's liquidity depends upon

Accepted Answer

A)  the absolute size of its value and how long it takes to sell the asset at market value. 
B)  how long it takes to sell the asset at market value and the costs of selling the asset. 
C)  the costs of selling the asset and the fraction of its value that can be obtained if it is sold immediately. 
D)  the fraction of its value that can be obtained if it is sold immediately and the absolute size of its value. 
E)  the value of the asset at time of sale and the costs of selling the asset. 
A)  the absolute size of its value and how long it takes to sell the asset at market value. 
B)  how long it takes to sell the asset at market value and the costs of selling the asset. 
C)  the costs of selling the asset and the fraction of its value that can be obtained if it is sold immediately. 
D)  the fraction of its value that can be obtained if it is sold immediately and the absolute size of its value. 
E)  the value of the asset at time of sale and the costs of selling the asset.

Question 13

According to a study by Thomas Cooley and Gary Hansen,the cost in lost consumption of a 10% per annum rate of inflation is

Accepted Answer

A)  negative. 
B)  approximately 0.001%. 
C)  approximately 0.5%. 
D)  approximately 5.0%. 
E)  approximately 0.14%. 
A)  negative. 
B)  approximately 0.001%. 
C)  approximately 0.5%. 
D)  approximately 5.0%. 
E)  approximately 0.14%.

Question 14

The nominal interest rate affects the opportunity cost of leisure because

Accepted Answer

A)  of the delay in when a consumer works and when they can spend the wage income. 
B)  the subsitution effect dominates the income effect. 
C)  the income effect dominates the substitution effect. 
D)  there is no delay in when the consumer works and can spend the wage income. 
E)  additional leisure requires the consumer to borrow. 
A)  of the delay in when a consumer works and when they can spend the wage income. 
B)  the subsitution effect dominates the income effect. 
C)  the income effect dominates the substitution effect. 
D)  there is no delay in when the consumer works and can spend the wage income. 
E)  additional leisure requires the consumer to borrow.

Question 15

In the monetary intertemporal model,inflation is

Accepted Answer

A)  equal to the money growth rate. 
B)  proportional to the money growth rate but not equal. 
C)  always less than the money growth rate. 
D)  zero. 
E)  always greater than the money growth rate. 
A)  equal to the money growth rate. 
B)  proportional to the money growth rate but not equal. 
C)  always less than the money growth rate. 
D)  zero. 
E)  always greater than the money growth rate.

Question 16

An alternative way to achieve some of the benefits if the Friedman rule would be to

Accepted Answer

A)  suspend paying interest on the national debt. 
B)  pay interest on the component of outside money held by financial institutions as deposits at the Bank of Canada. 
C)  adopt a fixed exchange rate. 
D)  prohibit the central bank from conducting open-market operations. 
E)  reduce inflation rates to zero. 
A)  suspend paying interest on the national debt. 
B)  pay interest on the component of outside money held by financial institutions as deposits at the Bank of Canada. 
C)  adopt a fixed exchange rate. 
D)  prohibit the central bank from conducting open-market operations. 
E)  reduce inflation rates to zero.

Question 17

Problems with the use of commodity money include all of the following except

Accepted Answer

A)  it is expensive to produce. 
B)  there is an opportunity of fraud in the production of commodity money. 
C)  bits could be clipped off coins and melted down without detection. 
D)  it carries a high opportunity cost because the commodity could not be diverted from other uses. 
E)  there are several good substitutes. 
A)  it is expensive to produce. 
B)  there is an opportunity of fraud in the production of commodity money. 
C)  bits could be clipped off coins and melted down without detection. 
D)  it carries a high opportunity cost because the commodity could not be diverted from other uses. 
E)  there are several good substitutes.

Question 18

A consumer is said to be risk-averse when the consumer

Accepted Answer

A)  purchases assets with a zero nominal interest rate. 
B)  prefers to hold assets with more non-diversified risk. 
C)  prefers to hold assets with less non-diversified risk. 
D)  prefers to not purchase a portfolio of assets. 
E)  purchases assets with maturities of less than one year. 
A)  purchases assets with a zero nominal interest rate. 
B)  prefers to hold assets with more non-diversified risk. 
C)  prefers to hold assets with less non-diversified risk. 
D)  prefers to not purchase a portfolio of assets. 
E)  purchases assets with maturities of less than one year.

Question 19

Credit cards should not be considered a form of money because

Accepted Answer

A)  credit cards are not universally accepted. 
B)  a credit card can only be used by the cardholder. 
C)  money and credit are fundamentally different. 
D)  they are too susceptible to fraud. 
E)  they are not a good medium of exchange. 
A)  credit cards are not universally accepted. 
B)  a credit card can only be used by the cardholder. 
C)  money and credit are fundamentally different. 
D)  they are too susceptible to fraud. 
E)  they are not a good medium of exchange.

Question 20

The Diamond-Dybvig model provides a rationale for the phenomenon of

Accepted Answer

A)  undercapitalized banks. 
B)  banks making overly risky loans. 
C)  bank runs. 
D)  deflation. 
E)  banks carrying too many illiquid assets. 
A)  undercapitalized banks. 
B)  banks making overly risky loans. 
C)  bank runs. 
D)  deflation. 
E)  banks carrying too many illiquid assets.

To implement the Friedman rule for long-term monetary policy,the monetary authority would need to set the

In Canadian history,use of a commodity-backed paper currency is associated with the

A depository institution can make highly illiquid and long-maturity loans with funds obtained by issuing transaction deposits because

Circulating private bank notes

A system that uses commodity-backed paper currency is most like a system that

Fiat money

The causal link between money growth and inflation is most closely associated with

An increase in the inflation rate shifts the labour

A credit default swap is

If an increase in the growth rate of the money supply results in an equal increase in the rate of inflation with no effect on any real variables,we say that

In comparing the U.S.and Canadian banking systems,on an average per capita basis,Canada has

An asset's liquidity depends upon

According to a study by Thomas Cooley and Gary Hansen,the cost in lost consumption of a 10% per annum rate of inflation is

The nominal interest rate affects the opportunity cost of leisure because

In the monetary intertemporal model,inflation is

An alternative way to achieve some of the benefits if the Friedman rule would be to

Problems with the use of commodity money include all of the following except

A consumer is said to be risk-averse when the consumer

Credit cards should not be considered a form of money because

The Diamond-Dybvig model provides a rationale for the phenomenon of

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money, Inflation, and Banking: A Deeper Look

Filters

Exam 17: Money in the Open Economy

To implement the Friedman rule for long-term monetary policy,the monetary authority would need to set the

In Canadian history,use of a commodity-backed paper currency is associated with the

A depository institution can make highly illiquid and long-maturity loans with funds obtained by issuing transaction deposits because

Circulating private bank notes

A system that uses commodity-backed paper currency is most like a system that

Fiat money

The causal link between money growth and inflation is most closely associated with

An increase in the inflation rate shifts the labour

A credit default swap is

If an increase in the growth rate of the money supply results in an equal increase in the rate of inflation with no effect on any real variables,we say that

In comparing the U.S.and Canadian banking systems,on an average per capita basis,Canada has

An asset's liquidity depends upon

According to a study by Thomas Cooley and Gary Hansen,the cost in lost consumption of a 10% per annum rate of inflation is

The nominal interest rate affects the opportunity cost of leisure because

In the monetary intertemporal model,inflation is

An alternative way to achieve some of the benefits if the Friedman rule would be to

Problems with the use of commodity money include all of the following except

A consumer is said to be risk-averse when the consumer

Credit cards should not be considered a form of money because

The Diamond-Dybvig model provides a rationale for the phenomenon of

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money, Inflation, and Banking: A Deeper Look

Filters