Question 1

What is the reason behind the seven-year appointment for the governor of Bank of Canada?

Accepted Answer

A)  It makes the system compatible with the ones in other countries. 
B)  It confers stability to the financial system. 
C)  It allows the governor time to implement changes and to analyze the results of those changes. 
D)  It insulates the governor from political pressure. 
A)  It makes the system compatible with the ones in other countries. 
B)  It confers stability to the financial system. 
C)  It allows the governor time to implement changes and to analyze the results of those changes. 
D)  It insulates the governor from political pressure.

Question 2

Denote a bank's assets by A,the bank's debt (deposits plus debt issued by the bank)by D,and the bank's capital by C.Starting from the identity A = C + D and using the definition of leverage ratio L = A / C,show that the percentage change in capital is equal to the leverage ratio times the percentage change in assets.

Accepted Answer

Let us denote an absolute (not percentag

Question 3

If the reserve ratio is 100 percent,how much will the money supply eventually increase if there is a deposit of $500 of paper money in a bank?

Accepted Answer

A)  $0- 
B)  $500 
C)  $1000 
D)  $5000 
A)  $0- 
B)  $500 
C)  $1000 
D)  $5000

Question 4

What is a generally accepted medium of exchange?

Accepted Answer

A)  a plane ticket 
B)  federal government bonds 
C)  diamonds 
D)  currency 
A)  a plane ticket 
B)  federal government bonds 
C)  diamonds 
D)  currency

Question 5

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 repayment rate 
C)  the bank rate 
D)  the dividend debt 
A)  the prime rate 
B)  the federal repayment rate 
C)  the bank rate 
D)  the dividend debt

Question 6

What is a bank's capital?

Accepted Answer

A)  the bank's reserves 
B)  the bank's deposits 
C)  the bank's debt 
D)  the bank's equity 
A)  the bank's reserves 
B)  the bank's deposits 
C)  the bank's debt 
D)  the bank's equity

Question 7

What is one of the functions of the Bank of Canada?

Accepted Answer

A)  to maximize profits on behalf of its shareholders 
B)  to issue currency 
C)  to convert currency into gold 
D)  to bail out troubled commercial banks 
A)  to maximize profits on behalf of its shareholders 
B)  to issue currency 
C)  to convert currency into gold 
D)  to bail out troubled commercial banks

Question 8

Which statement best describes the outcomes of a decrease in reserve requirements?

Accepted Answer

A)  The reserve ratio decreases,the money multiplier decreases,and the money supply decreases. 
B)  The reserve ratio increases,the money multiplier increases,and the money supply increases. 
C)  The reserve ratio decreases,the money multiplier increases,and the money supply increases. 
D)  The reserve ratio increases,the money multiplier decreases,and the money supply decreases. 
A)  The reserve ratio decreases,the money multiplier decreases,and the money supply decreases. 
B)  The reserve ratio increases,the money multiplier increases,and the money supply increases. 
C)  The reserve ratio decreases,the money multiplier increases,and the money supply increases. 
D)  The reserve ratio increases,the money multiplier decreases,and the money supply decreases.

Question 9

Which statement best illustrates the medium of exchange function of money?

Accepted Answer

A)  You keep some money hidden in your shoe. 
B)  Your recent tax assessment has valued your condo at $200,000.. 
C)  You pay for your double latte using currency. 
D)  You lend $25 to your friend. 
A)  You keep some money hidden in your shoe. 
B)  Your recent tax assessment has valued your condo at $200,000.. 
C)  You pay for your double latte using currency. 
D)  You lend $25 to your friend.

Question 10

How could the Bank of Canada increase the money supply?

Accepted Answer

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

Question 11

Suppose the reserve ratio is 20 percent and banks do not hold excess reserves.Suppose the Bank of Canada sells $10 million of bonds to the public.Which statement best describes the effects of this open-market operation?

Accepted Answer

A)  Bank reserves increase by $1 million,and the money supply eventually increases by $10 million. 
B)  Bank reserves increase by $10 million,and the money supply eventually increases by $50 million. 
C)  Bank reserves decrease by $1 million,and the money supply eventually increases by $10 million. 
D)  Bank reserves decrease by $10 million,and the money supply eventually decreases by $50 million. 
A)  Bank reserves increase by $1 million,and the money supply eventually increases by $10 million. 
B)  Bank reserves increase by $10 million,and the money supply eventually increases by $50 million. 
C)  Bank reserves decrease by $1 million,and the money supply eventually increases by $10 million. 
D)  Bank reserves decrease by $10 million,and the money supply eventually decreases by $50 million.

Question 12

Are credit cards and debit cards money? What's the difference between credit and debit cards?

Accepted Answer

Neither credit cards nor debit cards are

Question 13

M1+ includes savings deposits.

Accepted Answer

A) True 
 B)False

Question 14

A bank has (in millions): $200 assets,$140 deposits,and $40 debt.If the bank's assets decrease by 10 percent,by how much does the bank's capital change?

Accepted Answer

A)  It decreases by 100 percent. 
B)  It decreases by 5 percent. 
C)  It increases by 100 percent. 
D)  It increases by 5 percent. 
A)  It decreases by 100 percent. 
B)  It decreases by 5 percent. 
C)  It increases by 100 percent. 
D)  It increases by 5 percent.

Question 15

In a fractional reserve banking system,how does an increase in the reserve requirement change the money multiplier?

Accepted Answer

A)  The money multiplier increases by a higher percentage change than the increase in the reserve ratio. 
B)  The money multiplier decreases by a higher percentage change than the increase in the reserve ratio. 
C)  The money multiplier increases by a lower percentage change than the increase in the reserve ratio. 
D)  The money multiplier decreases by a lower percentage change than the increase in the reserve ratio. 
A)  The money multiplier increases by a higher percentage change than the increase in the reserve ratio. 
B)  The money multiplier decreases by a higher percentage change than the increase in the reserve ratio. 
C)  The money multiplier increases by a lower percentage change than the increase in the reserve ratio. 
D)  The money multiplier decreases by a lower percentage change than the increase in the reserve ratio.

Question 16

Which list contains only actions that decrease the money supply?

Accepted Answer

A)  lowering the bank rate; raising the reserve requirement ratio 
B)  lowering the bank rate; lowering the reserve requirement ratio 
C)  raising the bank rate; raising the reserve requirement ratio 
D)  raising the bank rate; lowering the reserve requirement ratio 
A)  lowering the bank rate; raising the reserve requirement ratio 
B)  lowering the bank rate; lowering the reserve requirement ratio 
C)  raising the bank rate; raising the reserve requirement ratio 
D)  raising the bank rate; lowering the reserve requirement ratio

Question 17

Table 10-4
The following information pertains to the Bank of Moncton.  
-Refer to the Table 10-4.Assume that all other banks hold only the required 4 percent of deposits as reserves,and that people hold only deposits and no currency.If the Bank of Moncton decides to hold reserves of 4 percent,by how much would the economy's money supply increase?

Accepted Answer

A)  $30,000 
B)  $35,000 
C)  $42,000 
D)  $45,000 
A)  $30,000 
B)  $35,000 
C)  $42,000 
D)  $45,000

Question 18

Which two of the ten principles of economics imply that the Bank of Canada can profoundly affect the economy?

Accepted Answer

1.Prices rise when the governm

Question 19

At one time,the country of Sylvania had no banks,but had currency of $10 million.Then a banking system was established with a reserve requirement of 20 percent.The people of Sylvania now keep half their money in the form of currency and half in the form of bank deposits.If banks do not hold excess reserves,how much currency do the people of Sylvania now hold?

Accepted Answer

A)  $2 million 
B)  $5 million 
C)  $9 million 
D)  $12 million 
A)  $2 million 
B)  $5 million 
C)  $9 million 
D)  $12 million

Question 20

Which of the following is quantitative easing?

Accepted Answer

A)  The Bank of Canada sells short-term government securities. 
B)  The Bank of Canada sells long-term government securities. 
C)  The Bank of Canada buys long-term government securities. 
D)  The Bank of Canada buys short-term government securities. 
A)  The Bank of Canada sells short-term government securities. 
B)  The Bank of Canada sells long-term government securities. 
C)  The Bank of Canada buys long-term government securities. 
D)  The Bank of Canada buys short-term government securities.

What is the reason behind the seven-year appointment for the governor of Bank of Canada?

If the reserve ratio is 100 percent,how much will the money supply eventually increase if there is a deposit of $500 of paper money in a bank?

What is a generally accepted medium of exchange?

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

What is a bank's capital?

What is one of the functions of the Bank of Canada?

Which statement best describes the outcomes of a decrease in reserve requirements?

Which statement best illustrates the medium of exchange function of money?

How could the Bank of Canada increase the money supply?

Suppose the reserve ratio is 20 percent and banks do not hold excess reserves.Suppose the Bank of Canada sells $10 million of bonds to the public.Which statement best describes the effects of this open-market operation?

Are credit cards and debit cards money? What's the difference between credit and debit cards?

M1+ includes savings deposits.

A bank has (in millions): $200 assets,$140 deposits,and $40 debt.If the bank's assets decrease by 10 percent,by how much does the bank's capital change?

In a fractional reserve banking system,how does an increase in the reserve requirement change the money multiplier?

Which list contains only actions that decrease the money supply?

Which two of the ten principles of economics imply that the Bank of Canada can profoundly affect the economy?

Which of the following is quantitative easing?

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

Exam 10: The Monetary System

What is the reason behind the seven-year appointment for the governor of Bank of Canada?

If the reserve ratio is 100 percent,how much will the money supply eventually increase if there is a deposit of $500 of paper money in a bank?

What is a generally accepted medium of exchange?

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

What is a bank's capital?

What is one of the functions of the Bank of Canada?

Which statement best describes the outcomes of a decrease in reserve requirements?

Which statement best illustrates the medium of exchange function of money?

How could the Bank of Canada increase the money supply?

Suppose the reserve ratio is 20 percent and banks do not hold excess reserves.Suppose the Bank of Canada sells $10 million of bonds to the public.Which statement best describes the effects of this open-market operation?

Are credit cards and debit cards money? What's the difference between credit and debit cards?

M1+ includes savings deposits.

A bank has (in millions): $200 assets,$140 deposits,and $40 debt.If the bank's assets decrease by 10 percent,by how much does the bank's capital change?

In a fractional reserve banking system,how does an increase in the reserve requirement change the money multiplier?

Which list contains only actions that decrease the money supply?

Which two of the ten principles of economics imply that the Bank of Canada can profoundly affect the economy?

Which of the following is quantitative easing?

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