Question 1

How can the Bank of Canada increase the money supply?

Accepted Answer

A)  by conducting open-market sales and raising the bank rate 
B)  by conducting open-market sales and lowering the bank rate 
C)  by conducting open-market purchases and raising the bank rate 
D)  by conducting open-market purchases and lowering the bank rate 
A)  by conducting open-market sales and raising the bank rate 
B)  by conducting open-market sales and lowering the bank rate 
C)  by conducting open-market purchases and raising the bank rate 
D)  by conducting open-market purchases and lowering the bank rate

Question 2

Which statement best describes the outcome of a decrease in the bank rate?

Accepted Answer

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

Question 3

Table 10-2  
-Refer to the Table 10-2.If the reserve requirement is 30 percent,what is this bank's reserve position?

Accepted Answer

A)  It has $29,000 of excess reserves. 
B)  It needs $10,000 more in reserves to meet its reserve requirement. 
C)  It needs $27,500 more in reserves to meet its reserve requirement. 
D)  It just meets its reserve requirement. 
A)  It has $29,000 of excess reserves. 
B)  It needs $10,000 more in reserves to meet its reserve requirement. 
C)  It needs $27,500 more in reserves to meet its reserve requirement. 
D)  It just meets its reserve requirement.

Question 4

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 25 percent,what happens to the money supply in the very short term?

Accepted Answer

A)  It decreases by $100. 
B)  It increases by $25. 
C)  It decreases by $25. 
D)  It increases by $100. 
A)  It decreases by $100. 
B)  It increases by $25. 
C)  It decreases by $25. 
D)  It increases by $100.

Question 5

Suppose the reserve ratio is 10 percent and banks do not hold excess reserves.Under these circumstances,suppose the Bank of Canada sells $60 million of bonds to the public.Which statement best describes the effects of this open-market operation?

Accepted Answer

A)  Bank reserves increase by $60 million,and the money supply eventually increases by $600 million. 
B)  Bank reserves increase by $60 million,and the money supply eventually increases by $800 million. 
C)  Bank reserves decrease by $60 million,and the money supply eventually decreases by $600 million. 
D)  Bank reserves decrease by $60 million,and the money supply eventually decreases by $800 million. 
A)  Bank reserves increase by $60 million,and the money supply eventually increases by $600 million. 
B)  Bank reserves increase by $60 million,and the money supply eventually increases by $800 million. 
C)  Bank reserves decrease by $60 million,and the money supply eventually decreases by $600 million. 
D)  Bank reserves decrease by $60 million,and the money supply eventually decreases by $800 million.

Question 6

If banks decide to hold a smaller part of their deposits as excess reserves,the money supply will fall,other things equal.

Accepted Answer

A) True 
 B)False

Question 7

If the Bank of Canada decreases reserve requirements,the money supply will increase.

Accepted Answer

A) True 
 B)False

Question 8

How could the Bank of Canada decrease the money supply?

Accepted Answer

A)  by buying government bonds 
B)  by decreasing the bank rate 
C)  by decreasing the reserve requirement 
D)  by increasing the bank rate 
A)  by buying government bonds 
B)  by decreasing the bank rate 
C)  by decreasing the reserve requirement 
D)  by increasing the bank rate

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 contro

Question 10

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 11

If the reserve ratio is 10 percent,how much is the money multiplier?

Accepted Answer

A)  1 / 10 
B)  9 / 10 
C)  10 
D)  100 
A)  1 / 10 
B)  9 / 10 
C)  10 
D)  100

Question 12

Which list contains only actions that increase the money supply?

Accepted Answer

A)  raising the bank rate; making open-market purchases 
B)  raising the bank rate; making open-market sales 
C)  lowering the bank rate; making open-market purchases 
D)  lowering the bank rate; making open-market sales 
A)  raising the bank rate; making open-market purchases 
B)  raising the bank rate; making open-market sales 
C)  lowering the bank rate; making open-market purchases 
D)  lowering the bank rate; making open-market sales

Question 13

Which of the following is a sterilization operation that supports the Canadian dollar?

Accepted Answer

A)  The Bank of Canada sells U.S.dollars and buys government bonds. 
B)  The Bank of Canada buys U.S.dollars and sells government bonds. 
C)  The Bank of Canada sells both U.S.dollars and government bonds. 
D)  The Bank of Canada buys both U.S.dollars and government bonds. 
A)  The Bank of Canada sells U.S.dollars and buys government bonds. 
B)  The Bank of Canada buys U.S.dollars and sells government bonds. 
C)  The Bank of Canada sells both U.S.dollars and government bonds. 
D)  The Bank of Canada buys both U.S.dollars and government bonds.

Question 14

Suppose the banking system has $10 million in reserves and the reserve ratio is 25 percent.Then bankers decide to decrease the reserve ratio to 20 percent.How does this decision eventually change the money supply?

Accepted Answer

A)  increases by $0.5 million 
B)  increases by $5 million 
C)  increases by $10 million 
D)  increases by $20 million 
A)  increases by $0.5 million 
B)  increases by $5 million 
C)  increases by $10 million 
D)  increases by $20 million

Question 15

Table 10-1  
-Refer to the Table 10-1.What is the reserve ratio?

Accepted Answer

A)  0 percent 
B)  15 percent 
C)  85 percent 
D)  100 percent 
A)  0 percent 
B)  15 percent 
C)  85 percent 
D)  100 percent

Question 16

Suppose a bank has a 10 percent reserve ratio,$3000 in deposits,and it loans out all it can,given the reserve ratio.Which of the following describes the bank's assets?

Accepted Answer

A)  It has $30 in reserves and $2700 in loans. 
B)  It has $30 in reserves and $2970 in loans. 
C)  It has $300 in reserves and $2700 in loans. 
D)  It has $300 in reserves and $3000 in loans. 
A)  It has $30 in reserves and $2700 in loans. 
B)  It has $30 in reserves and $2970 in loans. 
C)  It has $300 in reserves and $2700 in loans. 
D)  It has $300 in reserves and $3000 in loans.

Question 17

What characterizes commodity money?

Accepted Answer

A)  It is money that is backed by gold. 
B)  It is the principal type of money in use today. 
C)  It is money with intrinsic value. 
D)  It is comprised of receipts created in international trade that are used as a medium of exchange. 
A)  It is money that is backed by gold. 
B)  It is the principal type of money in use today. 
C)  It is money with intrinsic value. 
D)  It is comprised of receipts created in international trade that are used as a medium of exchange.

Question 18

Suppose that the reserve ratio is 7 percent and that a bank has $3000 in deposits.What are its required reserves?

Accepted Answer

A)  $50 
B)  $210 
C)  $510 
D)  $1200 
A)  $50 
B)  $210 
C)  $510 
D)  $1200

Question 19

If the reserve ratio is 15 percent,by how much will an additional $1000 of reserves increase the money supply?

Accepted Answer

A)  $1176 
B)  $1275 
C)  $5667 
D)  $6667 
A)  $1176 
B)  $1275 
C)  $5667 
D)  $6667

Question 20

Who chairs the Board of Directors of the Bank of Canada?

Accepted Answer

A)  the governor of the Bank of Canada 
B)  the Prime Minister 
C)  the Minister of Finance 
D)  the Governor General 
A)  the governor of the Bank of Canada 
B)  the Prime Minister 
C)  the Minister of Finance 
D)  the Governor General

How can the Bank of Canada increase the money supply?

Which statement best describes the outcome of a decrease in the bank rate?

Table 10-2 -Refer to the Table 10-2.If the reserve requirement is 30 percent,what is this bank's reserve position?

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 25 percent,what happens to the money supply in the very short term?

Suppose the reserve ratio is 10 percent and banks do not hold excess reserves.Under these circumstances,suppose the Bank of Canada sells $60 million of bonds to the public.Which statement best describes the effects of this open-market operation?

If banks decide to hold a smaller part of their deposits as excess reserves,the money supply will fall,other things equal.

If the Bank of Canada decreases reserve requirements,the money supply will increase.

How could the Bank of Canada decrease the money supply?

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.

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

If the reserve ratio is 10 percent,how much is the money multiplier?

Which list contains only actions that increase the money supply?

Which of the following is a sterilization operation that supports the Canadian dollar?

Suppose the banking system has $10 million in reserves and the reserve ratio is 25 percent.Then bankers decide to decrease the reserve ratio to 20 percent.How does this decision eventually change the money supply?

Table 10-1 -Refer to the Table 10-1.What is the reserve ratio?

Suppose a bank has a 10 percent reserve ratio,$3000 in deposits,and it loans out all it can,given the reserve ratio.Which of the following describes the bank's assets?

What characterizes commodity money?

Suppose that the reserve ratio is 7 percent and that a bank has $3000 in deposits.What are its required reserves?

If the reserve ratio is 15 percent,by how much will an additional $1000 of reserves increase the money supply?

Who chairs the Board of Directors of the Bank of Canada?

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 can the Bank of Canada increase the money supply?

Which statement best describes the outcome of a decrease in the bank rate?

Table 10-2 -Refer to the Table 10-2.If the reserve requirement is 30 percent,what is this bank's reserve position?

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 25 percent,what happens to the money supply in the very short term?

Suppose the reserve ratio is 10 percent and banks do not hold excess reserves.Under these circumstances,suppose the Bank of Canada sells $60 million of bonds to the public.Which statement best describes the effects of this open-market operation?

If banks decide to hold a smaller part of their deposits as excess reserves,the money supply will fall,other things equal.

If the Bank of Canada decreases reserve requirements,the money supply will increase.

How could the Bank of Canada decrease the money supply?

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.

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

If the reserve ratio is 10 percent,how much is the money multiplier?

Which list contains only actions that increase the money supply?

Which of the following is a sterilization operation that supports the Canadian dollar?

Suppose the banking system has $10 million in reserves and the reserve ratio is 25 percent.Then bankers decide to decrease the reserve ratio to 20 percent.How does this decision eventually change the money supply?

Table 10-1 -Refer to the Table 10-1.What is the reserve ratio?

Suppose a bank has a 10 percent reserve ratio,$3000 in deposits,and it loans out all it can,given the reserve ratio.Which of the following describes the bank's assets?

What characterizes commodity money?

Suppose that the reserve ratio is 7 percent and that a bank has $3000 in deposits.What are its required reserves?

If the reserve ratio is 15 percent,by how much will an additional $1000 of reserves increase the money supply?

Who chairs the Board of Directors of the Bank of Canada?

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