Question 1

Which list contains only actions that increase the money supply?

Accepted Answer

A)  lowering the bank rate; raising the reserve requirement ratio 
B)  lowering the bank rate; lowing 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; lowing 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 2

If the reserve ratio decreased from 20 percent to 10 percent,which of the following would happen to the money multiplier?

Accepted Answer

A)  It would rise from 10 to 20. 
B)  It would rise from 5 to 10. 
C)  It would fall from 10 to 5. 
D)  It would fall from 20 to 5. 
A)  It would rise from 10 to 20. 
B)  It would rise from 5 to 10. 
C)  It would fall from 10 to 5. 
D)  It would fall from 20 to 5.

Question 3

Which statement best describes the outcomes of open-market purchases conducted by the Bank of Canada?

Accepted Answer

A)  Bank reserves increase,and the money supply increases. 
B)  Bank reserves increase,and the money supply decreases. 
C)  The Bank of Canada borrows from member banks,which increases the money supply. 
D)  The Bank of Canada lends money to member banks,which decreases the money supply. 
A)  Bank reserves increase,and the money supply increases. 
B)  Bank reserves increase,and the money supply decreases. 
C)  The Bank of Canada borrows from member banks,which increases the money supply. 
D)  The Bank of Canada lends money to member banks,which decreases the money supply.

Question 4

Suppose that the reserve ratio is 9 percent and that a bank has $2000 in deposits.What are its required reserves?

Accepted Answer

A)  $100 
B)  $120 
C)  $140 
D)  $180 
A)  $100 
B)  $120 
C)  $140 
D)  $180

Question 5

What is the fundamental function of credit cards?

Accepted Answer

A)  Credit cards are used for deferring payments. 
B)  Credit cards are used as store of value. 
C)  Credit cards are used for increasing the money supply. 
D)  Credit cards are used as investment assets. 
A)  Credit cards are used for deferring payments. 
B)  Credit cards are used as store of value. 
C)  Credit cards are used for increasing the money supply. 
D)  Credit cards are used as investment assets.

Question 6

What is a characteristic of paper money?

Accepted Answer

A)  It has a high intrinsic value. 
B)  It hinders efficient allocation of resources. 
C)  It is valuable because it is generally accepted in trade. 
D)  It is valuable only because of the legal tender requirement. 
A)  It has a high intrinsic value. 
B)  It hinders efficient allocation of resources. 
C)  It is valuable because it is generally accepted in trade. 
D)  It is valuable only because of the legal tender requirement.

Question 7

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

Accepted Answer

When the reserve requirement is less tha

Question 8

How does currency contribute to the money supply?

Accepted Answer

A)  Currency held by the public and by banks is part of the money supply. 
B)  Currency held by the public is part of the money supply,but currency held by banks is not. 
C)  Currency held by the public is not part of the money supply,but currency held by banks is. 
D)  Currency held by the public or banks is not part of the money supply since it is not included in M1. 
A)  Currency held by the public and by banks is part of the money supply. 
B)  Currency held by the public is part of the money supply,but currency held by banks is not. 
C)  Currency held by the public is not part of the money supply,but currency held by banks is. 
D)  Currency held by the public or banks is not part of the money supply since it is not included in M1.

Question 9

How has the Bank of Canada historically viewed changes in reserve requirements to control the money supply?

Accepted Answer

A)  It has been gradually lowering the reserve requirements to keep inflation rates low. 
B)  It has traditionally made frequent changes in order to stabilize the economy. 
C)  It has been reluctant to make frequent changes as this would disrupt the business of banking. 
D)  It has been gradually increasing the reserve requirements to keep inflation rates low. 
A)  It has been gradually lowering the reserve requirements to keep inflation rates low. 
B)  It has traditionally made frequent changes in order to stabilize the economy. 
C)  It has been reluctant to make frequent changes as this would disrupt the business of banking. 
D)  It has been gradually increasing the reserve requirements to keep inflation rates low.

Question 10

What happened during the Great Depression in the early 1930s?

Accepted Answer

A)  the Great Depression was as bad in Canada as it was in the United States. 
B)  more banks in Canada closed than in the United States 
C)  the money supply rose sharply. 
D)  the value of Canadian exports increased considerably. 
A)  the Great Depression was as bad in Canada as it was in the United States. 
B)  more banks in Canada closed than in the United States 
C)  the money supply rose sharply. 
D)  the value of Canadian exports increased considerably.

Question 11

Which statement best illustrates the unit of account function of money?

Accepted Answer

A)  You list prices for candy sold on your website,www.sweettooth.com,in dollars. 
B)  You pay for your NHL tickets with dollars. 
C)  You keep $10 in your backpack for emergencies. 
D)  You sell a used copy of your textbook for $40. 
A)  You list prices for candy sold on your website,www.sweettooth.com,in dollars. 
B)  You pay for your NHL tickets with dollars. 
C)  You keep $10 in your backpack for emergencies. 
D)  You sell a used copy of your textbook for $40.

Question 12

Table 10-3
The following information pertains to the Bank of Kamloops.  
-Refer to the Table 10-3.Assume that all other banks hold only the required 5 percent of deposits as reserves and people hold only deposits and no currency.If the Bank of Kamloops decides to hold exactly 5 percent in reserves,by how much would the economy's money supply increase?

Accepted Answer

A)  $500 
B)  $1200 
C)  $1500 
D)  $2000 
A)  $500 
B)  $1200 
C)  $1500 
D)  $2000

Question 13

What is a characteristic of Scotiabank?

Accepted Answer

A)  It can issue currency. 
B)  It is part of the "big 5" commercial banks group. 
C)  It acts as a central bank for Nova Scotia. 
D)  It is owned by the Canadian government. 
A)  It can issue currency. 
B)  It is part of the "big 5" commercial banks group. 
C)  It acts as a central bank for Nova Scotia. 
D)  It is owned by the Canadian government.

Question 14

What characterizes fiat money?

Accepted Answer

A)  It has no intrinsic value. 
B)  It is backed by gold. 
C)  It has intrinsic value equal to its value in exchange. 
D)  It is an illiquid asset. 
A)  It has no intrinsic value. 
B)  It is backed by gold. 
C)  It has intrinsic value equal to its value in exchange. 
D)  It is an illiquid asset.

Question 15

During wars,the public tends to hold relatively more currency and relatively fewer deposits.Which statement best describes the effects of this increase in currency holdings?

Accepted Answer

A)  Reserves would decrease,and the money supply would increase. 
B)  Reserves and the money supply would decrease. 
C)  Reserves would increase,but the money supply would be unchanged. 
D)  Reserves would decrease,but the money supply would be unchanged. 
A)  Reserves would decrease,and the money supply would increase. 
B)  Reserves and the money supply would decrease. 
C)  Reserves would increase,but the money supply would be unchanged. 
D)  Reserves would decrease,but the money supply would be unchanged.

Question 16

Which statement best defines the bank rate?

Accepted Answer

A)  It is the interest rate the Bank of Canada charges banks. 
B)  It is one divided by the difference between one and the reserve ratio. 
C)  It is the interest rate banks receive on reserve deposits with Bank of Canada. 
D)  It is the interest rate that banks charge on overnight loans to other banks. 
A)  It is the interest rate the Bank of Canada charges banks. 
B)  It is one divided by the difference between one and the reserve ratio. 
C)  It is the interest rate banks receive on reserve deposits with Bank of Canada. 
D)  It is the interest rate that banks charge on overnight loans to other banks.

Question 17

How do deposits and reserves appear on a bank's T-account?

Accepted Answer

A)  Both deposits and reserves are assets. 
B)  Both deposits and reserves are liabilities. 
C)  Deposits are assets,and reserves are liabilities. 
D)  Reserves are assets,and deposits are liabilities. 
A)  Both deposits and reserves are assets. 
B)  Both deposits and reserves are liabilities. 
C)  Deposits are assets,and reserves are liabilities. 
D)  Reserves are assets,and deposits are liabilities.

Question 18

Table 10-3
The following information pertains to the Bank of Kamloops.  
-Refer to the Table 10-3.If the Bank of Canada requires banks to hold 5 percent of deposits as reserves,how much in excess reserves does the Bank of Kamloops now hold?

Accepted Answer

A)  $5 
B)  $25 
C)  $60 
D)  $65 
A)  $5 
B)  $25 
C)  $60 
D)  $65

Question 19

Which of the following is included in M1+?

Accepted Answer

A)  government bonds 
B)  demand deposits 
C)  savings deposits 
D)  travellers' cheques 
A)  government bonds 
B)  demand deposits 
C)  savings deposits 
D)  travellers' cheques

Question 20

Who determines the amount of money in the economy?

Accepted Answer

A)  The Bank of Canada controls the money supply precisely. 
B)  The amount of money in the economy does not depend on the behaviour of depositors. 
C)  The amount of money in the economy depends in part on the behaviour of banks. 
D)  The Minister of Finance determines the amount of money in the economy by law. 
A)  The Bank of Canada controls the money supply precisely. 
B)  The amount of money in the economy does not depend on the behaviour of depositors. 
C)  The amount of money in the economy depends in part on the behaviour of banks. 
D)  The Minister of Finance determines the amount of money in the economy by law.

Which list contains only actions that increase the money supply?

If the reserve ratio decreased from 20 percent to 10 percent,which of the following would happen to the money multiplier?

Which statement best describes the outcomes of open-market purchases conducted by the Bank of Canada?

Suppose that the reserve ratio is 9 percent and that a bank has $2000 in deposits.What are its required reserves?

What is the fundamental function of credit cards?

What is a characteristic of paper money?

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

How does currency contribute to the money supply?

How has the Bank of Canada historically viewed changes in reserve requirements to control the money supply?

What happened during the Great Depression in the early 1930s?

Which statement best illustrates the unit of account function of money?

What is a characteristic of Scotiabank?

What characterizes fiat money?

During wars,the public tends to hold relatively more currency and relatively fewer deposits.Which statement best describes the effects of this increase in currency holdings?

Which statement best defines the bank rate?

How do deposits and reserves appear on a bank's T-account?

Table 10-3 The following information pertains to the Bank of Kamloops. -Refer to the Table 10-3.If the Bank of Canada requires banks to hold 5 percent of deposits as reserves,how much in excess reserves does the Bank of Kamloops now hold?

Which of the following is included in M1+?

Who determines the amount of money in the economy?

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

Which list contains only actions that increase the money supply?

If the reserve ratio decreased from 20 percent to 10 percent,which of the following would happen to the money multiplier?

Which statement best describes the outcomes of open-market purchases conducted by the Bank of Canada?

Suppose that the reserve ratio is 9 percent and that a bank has $2000 in deposits.What are its required reserves?

What is the fundamental function of credit cards?

What is a characteristic of paper money?

Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.

How does currency contribute to the money supply?

How has the Bank of Canada historically viewed changes in reserve requirements to control the money supply?

What happened during the Great Depression in the early 1930s?

Which statement best illustrates the unit of account function of money?

What is a characteristic of Scotiabank?

What characterizes fiat money?

During wars,the public tends to hold relatively more currency and relatively fewer deposits.Which statement best describes the effects of this increase in currency holdings?

Which statement best defines the bank rate?

How do deposits and reserves appear on a bank's T-account?

Table 10-3 The following information pertains to the Bank of Kamloops. -Refer to the Table 10-3.If the Bank of Canada requires banks to hold 5 percent of deposits as reserves,how much in excess reserves does the Bank of Kamloops now hold?

Which of the following is included in M1+?

Who determines the amount of money in the economy?

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