Question 1

How does the Bank of Canada conduct open-market transactions?

Accepted Answer

A)  It prints new currency. 
B)  It buys or sells government bonds from or to the public. 
C)  It lowers the bank rate. 
D)  It increases its lending to chartered banks. 
A)  It prints new currency. 
B)  It buys or sells government bonds from or to the public. 
C)  It lowers the bank rate. 
D)  It increases its lending to chartered banks.

Question 2

Joe wants to trade eggs for sausage.Lashonda wants to trade eggs for orange juice.Joe and Lashonda have a double coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 3

Jeremiah deposits in a bank an amount of $1000 that he had been holding at home in a jar for a long time.
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 reserves,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.By definition,the money supply is curr

Question 4

Which of the following is included in M1+?

Accepted Answer

A)  credit cards 
B)  debit cards 
C)  currency 
D)  nonpersonal demand deposits 
A)  credit cards 
B)  debit cards 
C)  currency 
D)  nonpersonal demand deposits

Question 5

Which list contains only actions that increase the money supply?

Accepted Answer

A)  making open-market purchases; raising the reserve requirement ratio 
B)  making open-market purchases; lowering the reserve requirement ratio 
C)  making open-market sales; raising the reserve requirement ratio 
D)  making open-market sales; lowering the reserve requirement ratio 
A)  making open-market purchases; raising the reserve requirement ratio 
B)  making open-market purchases; lowering the reserve requirement ratio 
C)  making open-market sales; raising the reserve requirement ratio 
D)  making open-market sales; lowering the reserve requirement ratio

Question 6

What 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 7

A bank has $200 reserves,$800 loans,$400 securities,$1200 deposits,and $100 debt.
a)Calculate the bank's capital.
b)Calculate the bank's leverage ratio.
c)Suppose there is a stock market boom,so that the bank's assets increase by 2 percent.What is the percentage change in the bank's capital? What is the change in the bank's capital in dollars?
d)Suppose that,instead of stock market boom,some borrowers default on their debt so that the bank's assets decrease by 2 percent.How much is now the bank's capital?

Accepted Answer

a)Capital = Assets - Deposits - Debt = $

Question 8

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 9

As banks create money,they create wealth.

Accepted Answer

A) True 
 B)False

Question 10

How can the Bank of Canada directly protect a bank during a bank run?

Accepted Answer

A)  by increasing reserve requirements 
B)  by selling government bonds to the bank 
C)  by lending reserves to the bank 
D)  by increasing the overnight rate 
A)  by increasing reserve requirements 
B)  by selling government bonds to the bank 
C)  by lending reserves to the bank 
D)  by increasing the overnight rate

Question 11

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 12

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 13

Suppose a bank has $200,000 in deposits and $150,000 in loans.What is its reserve ratio?

Accepted Answer

A)  1 percent 
B)  5 percent 
C)  10 percent 
D)  25 percent 
A)  1 percent 
B)  5 percent 
C)  10 percent 
D)  25 percent

Question 14

Suppose the reserve ratio is 25 percent and the public holds $10 million in cash.Then the public decides to withdraw $5 million from the banks.How does the money supply eventually change?

Accepted Answer

A)  falls by $5 million 
B)  falls by $10 million 
C)  falls by $20 million 
D)  falls by $35 million 
A)  falls by $5 million 
B)  falls by $10 million 
C)  falls by $20 million 
D)  falls by $35 million

Question 15

The use of money allows trade to be roundabout.

Accepted Answer

A) True 
 B)False

Question 16

What is meant by the term "lender of last resort"? In what circumstances might the Bank of Canada be a lender of last resort?

Accepted Answer

A lender of last resort is a lender to t

Question 17

Which statement 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 18

What is the role of the Bank of Canada?

Accepted Answer

A)  to lend money to large companies 
B)  to make monetary policy 
C)  to raise taxes 
D)  to oversee government spending 
A)  to lend money to large companies 
B)  to make monetary policy 
C)  to raise taxes 
D)  to oversee government spending

Question 19

The Bank of Canada is a privately operated commercial bank.

Accepted Answer

A) True 
 B)False

Question 20

Gary's wealth is $1 million.Economists would say that Gary has $1 million worth of money.

Accepted Answer

A) True 
 B)False

How does the Bank of Canada conduct open-market transactions?

Joe wants to trade eggs for sausage.Lashonda wants to trade eggs for orange juice.Joe and Lashonda have a double coincidence of wants.

Which of the following is included in M1+?

Which list contains only actions that increase the money supply?

What is current Canadian currency?

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

As banks create money,they create wealth.

How can the Bank of Canada directly protect a bank during a bank run?

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

Suppose a bank has $200,000 in deposits and $150,000 in loans.What is its reserve ratio?

Suppose the reserve ratio is 25 percent and the public holds $10 million in cash.Then the public decides to withdraw $5 million from the banks.How does the money supply eventually change?

The use of money allows trade to be roundabout.

What is meant by the term "lender of last resort"? In what circumstances might the Bank of Canada be a lender of last resort?

Which statement best describes bank runs today?

What is the role of the Bank of Canada?

The Bank of Canada is a privately operated commercial bank.

Gary's wealth is $1 million.Economists would say that Gary has $1 million worth of money.

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

How does the Bank of Canada conduct open-market transactions?

Joe wants to trade eggs for sausage.Lashonda wants to trade eggs for orange juice.Joe and Lashonda have a double coincidence of wants.

Which of the following is included in M1+?

Which list contains only actions that increase the money supply?

What is current Canadian currency?

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

As banks create money,they create wealth.

How can the Bank of Canada directly protect a bank during a bank run?

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

Suppose a bank has $200,000 in deposits and $150,000 in loans.What is its reserve ratio?

Suppose the reserve ratio is 25 percent and the public holds $10 million in cash.Then the public decides to withdraw $5 million from the banks.How does the money supply eventually change?

The use of money allows trade to be roundabout.

What is meant by the term "lender of last resort"? In what circumstances might the Bank of Canada be a lender of last resort?

Which statement best describes bank runs today?

What is the role of the Bank of Canada?

The Bank of Canada is a privately operated commercial bank.

Gary's wealth is $1 million.Economists would say that Gary has $1 million worth of money.

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