Question 1

If the reserve ratio is 5 percent and a bank receives a new deposit of $500,by how much can the bank increase its new loans?

Accepted Answer

A)  by $21 
B)  by $279 
C)  by $475 
D)  by $500 
A)  by $21 
B)  by $279 
C)  by $475 
D)  by $500 C

Question 2

When was the Bank of Canada Act first enacted?

Accepted Answer

A)  1867 
B)  1934 
C)  1935 
D)  1984 
A)  1867 
B)  1934 
C)  1935 
D)  1984 B

Question 3

Which agency is responsible for regulating the money supply in Canada?

Accepted Answer

A)  the Currency and Securities Commission 
B)  the Bank of Canada 
C)  the TD Bank 
D)  the Canadian Payments Association 
A)  the Currency and Securities Commission 
B)  the Bank of Canada 
C)  the TD Bank 
D)  the Canadian Payments Association B

Question 4

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

Accepted Answer

A)  the Governor General 
B)  the Minister of Finance 
C)  the Director of the IMF 
D)  the Prime Minister 
A)  the Governor General 
B)  the Minister of Finance 
C)  the Director of the IMF 
D)  the Prime Minister

Question 5

Assume that banks do not hold excess reserves.The banking system has $50 million in reserves and has a reserve requirement of 10 percent.The public holds $20 million in currency.Then the public decides to withdraw $5 million in currency from the banking system.If the Bank of Canada wants to keep the money supply stable by changing the reserve requirement,then what will the new reserve requirement be?

Accepted Answer

A)  8.1 percent 
B)  9.1 percent 
C)  9.7 percent 
D)  10 percent 
A)  8.1 percent 
B)  9.1 percent 
C)  9.7 percent 
D)  10 percent

Question 6

At one time,the country of Aquilonia had no banks,but had currency of $10 million.Then a banking system was established with a reserve requirement of 10 percent.The people of Aquilonia deposited half of their currency into the banking system.If banks do not hold excess reserves,what is Aquilonia's money supply now?

Accepted Answer

A)  $10 million 
B)  $11 million 
C)  $50 million 
D)  $55 million 
A)  $10 million 
B)  $11 million 
C)  $50 million 
D)  $55 million

Question 7

Monetary policy is determined by the Bank of Canada's governor.

Accepted Answer

A) True 
 B)False

Question 8

Which statement best defines liquidity?

Accepted Answer

A)  It is the ease with which an asset is converted to the medium of exchange. 
B)  It is a measurement of the intrinsic value of commodity money. 
C)  It is the ability of an asset to retain purchasing power. 
D)  It refers to how many times a dollar changes hands in a given year. 
A)  It is the ease with which an asset is converted to the medium of exchange. 
B)  It is a measurement of the intrinsic value of commodity money. 
C)  It is the ability of an asset to retain purchasing power. 
D)  It refers to how many times a dollar changes hands in a given year.

Question 9

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 10

Draw a simple T-account for First National Bank of Me,which has $8000 of deposits,a reserve ratio of 10 percent,and excess reserves of $300.

Accepted Answer

First National Bank

Question 11

Table 10-1  
-Refer to the Table 10-1.If $1000 is deposited into the First Bank of Dawson City,what will happen?

Accepted Answer

A)  Reserves will decrease by $800. 
B)  Liabilities will decrease by $1000. 
C)  Assets will increase by $1000. 
D)  Reserves will increase by $800. 
A)  Reserves will decrease by $800. 
B)  Liabilities will decrease by $1000. 
C)  Assets will increase by $1000. 
D)  Reserves will increase by $800.

Question 12

Table 10-4
The following information pertains to the Bank of Moncton.  
-Refer to the Table 10-4.If all banks hold only the required 4 percent of deposits as reserves,then what is the money multiplier?

Accepted Answer

A)  5 
B)  10 
C)  15 
D)  25 
A)  5 
B)  10 
C)  15 
D)  25

Question 13

Ralph deposits half of his inheritance in a savings account at the bank.In doing so,Ralph is using money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 14

A bank has (in millions): $20 reserves,$80 loans,$40 securities,$120 deposits,and $10 debt.Calculate the bank's reserve ratio,assets,liabilities,capital,and leverage ratio.

Accepted Answer

Reserve ratio = Reserve / Deposits = 20

Question 15

If the reserve ratio is 10 percent and a bank receives a new deposit of $20,what happens to the bank's reserves in the longer term?

Accepted Answer

A)  increase by $2 
B)  increase by $18 
C)  increase by $20 
D)  increase by $200 
A)  increase by $2 
B)  increase by $18 
C)  increase by $20 
D)  increase by $200

Question 16

What do economists use the word "money" to refer to?

Accepted Answer

A)  income generated by the production of goods and services 
B)  those assets regularly used to buy goods and services 
C)  the value of a person's assets 
D)  the value of stocks and bonds 
A)  income generated by the production of goods and services 
B)  those assets regularly used to buy goods and services 
C)  the value of a person's assets 
D)  the value of stocks and bonds

Question 17

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 18

Which statement best describes the outcomes of a decrease in the reserve requirement in a fractional reserve system?

Accepted Answer

A)  Both the money multiplier and the money supply increase. 
B)  Both the money multiplier and the money supply decrease. 
C)  The money multiplier increases,but the money supply decreases. 
D)  The money multiplier decreases,but the money supply increases. 
A)  Both the money multiplier and the money supply increase. 
B)  Both the money multiplier and the money supply decrease. 
C)  The money multiplier increases,but the money supply decreases. 
D)  The money multiplier decreases,but the money supply increases.

Question 19

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

Accepted Answer

A)  to control all activities of the Bank of Canada 
B)  to issue the governor of the Bank of Canada a written directive to resign 
C)  to issue currency 
D)  to maintain the stability of the banking system 
A)  to control all activities of the Bank of Canada 
B)  to issue the governor of the Bank of Canada a written directive to resign 
C)  to issue currency 
D)  to maintain the stability of the banking system

Question 20

What is the difference between money and wealth?

Accepted Answer

Money is defined as the set of

If the reserve ratio is 5 percent and a bank receives a new deposit of $500,by how much can the bank increase its new loans?

When was the Bank of Canada Act first enacted?

Which agency is responsible for regulating the money supply in Canada?

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

Monetary policy is determined by the Bank of Canada's governor.

Which statement best defines liquidity?

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.

Draw a simple T-account for First National Bank of Me,which has $8000 of deposits,a reserve ratio of 10 percent,and excess reserves of $300.

Table 10-1 -Refer to the Table 10-1.If $1000 is deposited into the First Bank of Dawson City,what will happen?

Table 10-4 The following information pertains to the Bank of Moncton. -Refer to the Table 10-4.If all banks hold only the required 4 percent of deposits as reserves,then what is the money multiplier?

Ralph deposits half of his inheritance in a savings account at the bank.In doing so,Ralph is using money as a medium of exchange.

A bank has (in millions): $20 reserves,$80 loans,$40 securities,$120 deposits,and $10 debt.Calculate the bank's reserve ratio,assets,liabilities,capital,and leverage ratio.

If the reserve ratio is 10 percent and a bank receives a new deposit of $20,what happens to the bank's reserves in the longer term?

What do economists use the word "money" to refer to?

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.

Which statement best describes the outcomes of a decrease in the reserve requirement in a fractional reserve system?

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

What is the difference between money and wealth?

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 Small 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 5 percent and a bank receives a new deposit of $500,by how much can the bank increase its new loans?

When was the Bank of Canada Act first enacted?

Which agency is responsible for regulating the money supply in Canada?

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

Monetary policy is determined by the Bank of Canada's governor.

Which statement best defines liquidity?

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.

Draw a simple T-account for First National Bank of Me,which has $8000 of deposits,a reserve ratio of 10 percent,and excess reserves of $300.

Table 10-1 -Refer to the Table 10-1.If $1000 is deposited into the First Bank of Dawson City,what will happen?

Table 10-4 The following information pertains to the Bank of Moncton. -Refer to the Table 10-4.If all banks hold only the required 4 percent of deposits as reserves,then what is the money multiplier?

Ralph deposits half of his inheritance in a savings account at the bank.In doing so,Ralph is using money as a medium of exchange.

A bank has (in millions): $20 reserves,$80 loans,$40 securities,$120 deposits,and $10 debt.Calculate the bank's reserve ratio,assets,liabilities,capital,and leverage ratio.

If the reserve ratio is 10 percent and a bank receives a new deposit of $20,what happens to the bank's reserves in the longer term?

What do economists use the word "money" to refer to?

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.

Which statement best describes the outcomes of a decrease in the reserve requirement in a fractional reserve system?

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

What is the difference between money and wealth?

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 Small 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