Question 1

Chartered banks create money when they:

Accepted Answer

A)  accept cash deposits from the public.
B)  purchase government securities from the central banks.
C)  create demand deposits in exchange for IOUs.
D)  raise their interest rates.E) A) and D)
F) A) and C)

Question 2

Chartered banks are the major source of money creating in the Canadian economy.

Accepted Answer

A) True 
 B)False

Question 3

If we both have chequing accounts in the same chartered bank and I write a cheque in your name for $200, the bank's:

Accepted Answer

A)  balance sheet will be unchanged.
B)  cash reserves and demand deposits will both decline by $200.
C)  liabilities will decline by $200, but its net worth will increase by $200.
D)  assets and liabilities will both decline by $200.E) C) and D)
F) All of the above

Question 4

Refer to the information below, after a deposit of $10 billion of new currency into a chequing account in the banking system, the maximum amount by which the chartered banking system can expand the supply of money is: Consolidated balance sheet for the chartered banking system.Assume the desired reserve ratio is 10 percent.All figures are in billions.

Accepted Answer

A)  $9 billion.
B)  $45 billion.
C)  $36 billion.
D)  $90 billion.E) B) and D)
F) A) and B)

Question 5

In 2017, the value of M2++ in Canada was about:

Accepted Answer

A)  $182 billion.
B)  5,092 billion.
C)  $2,330 billion.
D)  $3,043 billion.E) A) and C)
F) A) and B)

Question 6

What function is money serving when you buy a ticket to a movie?

Accepted Answer

A)  a store of value
B)  a unit of account
C)  a transaction demand
D)  a medium of exchangeE) C) and D)
F) B) and D)

Question 7

If a coin is token money, its face value is greater than its intrinsic value.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements best describes the relationship between the real value or purchasing power of the monetary unit and the price level? The purchasing power of money:

Accepted Answer

A)  and the price level varies inversely.
B)  and the price level vary directly during recessions, but inversely during inflations.
C)  and the price level vary directly, but not proportionately.
D)  and the price level vary directly and proportionately.E) A) and B)
F) C) and D)

Question 9

When a cheque is cleared against a bank, it will lose:

Accepted Answer

A)  cash and securities.
B)  demand deposits and cash reserves.
C)  reserves and stock shares.
D)  loans and demand deposits.E) A) and B)
F) None of the above

Question 10

Consolidated balance sheet for the chartered banking system.Assume the desired reserve ratio is 10 percent.All figures are in billions.  Refer to the above information.The chartered banking system has excess reserves of:

Accepted Answer

A)  $0 billion.
B)  $30 billion.
C)  $60 billion.
D)  $70 billion.E) A) and D)
F) A) and C)

Question 11

Banks destroy money when they:

Accepted Answer

A)  buy government bonds.
B)  accept deposits of cash.
C)  fail to reissue loans that are paid off.
D)  clear cheques against another bank.E) None of the above
F) B) and C)

Question 12

Coins held in chartered banks are:

Accepted Answer

A)  included in M1, but not in M2.
B)  included both in M1 and in M2.
C)  included in M2, but not in M1.
D)  not part of the nation's money supply.E) None of the above
F) B) and C)

Question 13

The money supply is "backed":

Accepted Answer

A)  by the government's ability to control the supply of money and therefore to keep its value relatively stable.
B)  by government bonds.
C)  dollar-for-dollar with gold and silver.
D)  dollar-for-dollar with gold bullion.E) All of the above
F) C) and D)

Question 14

Refer to the information below.The monetary multiplier is: Consolidated balance sheet for the chartered banking system.All figures are in billions.Assume that the desired reserve ratio is 20 percent.

Accepted Answer

A)  4
B)  5
C)  8
D)  10E) A) and B)
F) A) and C)

Question 15

A chartered bank has desired reserve of $6000 and the reserve ratio is 20 percent.What are the chartered bank's demand-deposit liabilities?

Accepted Answer

A)  $1,200
B)  $9,000
C)  $30,000
D)  $120,000E) A) and B)
F) None of the above

Question 16

A $20 bill is an example of:

Accepted Answer

A)  legal tender.
B)  fiat money.
C)  a store of value.
D)  all of the above.E) A) and B)
F) C) and D)

Question 17

The amount of reserves that a chartered bank wishes to hold is equal to:

Accepted Answer

A)  the amount of its demand deposits.
B)  the sum of its demand deposits and time deposits.
C)  its demand deposits multiplied by the desired reserve ratio.
D)  none of the above.E) B) and C)
F) B) and D)

Question 18

The major component of the money supply (M1)  is:

Accepted Answer

A)  gold certificates.
B)  demand deposits.
C)  paper money in circulation.
D)  coins.E) A) and D)
F) A) and C)

Question 19

Which one of the following is presently preventing bank panics in Canada?

Accepted Answer

A)  the reserve requirement
B)  the fractional reserve system
C)  the gold standard
D)  deposit insuranceE) All of the above
F) A) and B)

Question 20

Demand deposits are:

Accepted Answer

A)  included in M1.
B)  not included in either M1 or M2.
C)  considered to be a near money.
D)  also called notice deposits.E) A) and B)
F) None of the above

Exam 14: B: Money, Banking, and Money Creation

The amount of reserves that a chartered bank wishes to hold is equal to:

Correct Answer
verified

The major component of the money supply (M1) is:

Correct Answer
verified

If a coin is token money, its face value is greater than its intrinsic value.

Correct Answer
verified

Which one of the following is presently preventing bank panics in Canada?

Correct Answer
verified

Coins held in chartered banks are:

Correct Answer
verified

The money supply is "backed":

Correct Answer
verified

Correct Answer
verified

Chartered banks are the major source of money creating in the Canadian economy.

Correct Answer
verified

When a cheque is cleared against a bank, it will lose:

Correct Answer
verified

Consolidated balance sheet for the chartered banking system.Assume the desired reserve ratio is 10 percent.All figures are in billions. Refer to the above information.The chartered banking system has excess reserves of:

Correct Answer
verified

A chartered bank has desired reserve of $6000 and the reserve ratio is 20 percent.What are the chartered bank's demand-deposit liabilities?

Correct Answer
verified

If we both have chequing accounts in the same chartered bank and I write a cheque in your name for $200, the bank's:

Correct Answer
verified

What function is money serving when you buy a ticket to a movie?

Correct Answer
verified

A $20 bill is an example of:

Correct Answer
verified

Which of the following statements best describes the relationship between the real value or purchasing power of the monetary unit and the price level? The purchasing power of money:

Correct Answer
verified

Banks destroy money when they:

Correct Answer
verified

Refer to the information below.The monetary multiplier is: Consolidated balance sheet for the chartered banking system.All figures are in billions.Assume that the desired reserve ratio is 20 percent.

Correct Answer
verified

Chartered banks create money when they:

Correct Answer
verified

Demand deposits are:

Correct Answer
verified

In 2017, the value of M2++ in Canada was about:

Correct Answer
verified

Exam 14: B: Money, Banking, and Money Creation

The amount of reserves that a chartered bank wishes to hold is equal to:

Correct AnswerverifiedShow Answer

The major component of the money supply (M1) is:

Correct AnswerverifiedShow Answer

If a coin is token money, its face value is greater than its intrinsic value.

Correct AnswerverifiedShow Answer

Which one of the following is presently preventing bank panics in Canada?

Correct AnswerverifiedShow Answer

Coins held in chartered banks are:

Correct AnswerverifiedShow Answer

The money supply is "backed":

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Chartered banks are the major source of money creating in the Canadian economy.

Correct AnswerverifiedShow Answer

When a cheque is cleared against a bank, it will lose:

Correct AnswerverifiedShow Answer

Consolidated balance sheet for the chartered banking system.Assume the desired reserve ratio is 10 percent.All figures are in billions. Refer to the above information.The chartered banking system has excess reserves of:

Correct AnswerverifiedShow Answer

A chartered bank has desired reserve of $6000 and the reserve ratio is 20 percent.What are the chartered bank's demand-deposit liabilities?

Correct AnswerverifiedShow Answer

If we both have chequing accounts in the same chartered bank and I write a cheque in your name for $200, the bank's:

Correct AnswerverifiedShow Answer

What function is money serving when you buy a ticket to a movie?

Correct AnswerverifiedShow Answer

A $20 bill is an example of:

Correct AnswerverifiedShow Answer

Which of the following statements best describes the relationship between the real value or purchasing power of the monetary unit and the price level? The purchasing power of money:

Correct AnswerverifiedShow Answer

Banks destroy money when they:

Correct AnswerverifiedShow Answer

Refer to the information below.The monetary multiplier is: Consolidated balance sheet for the chartered banking system.All figures are in billions.Assume that the desired reserve ratio is 20 percent.

Correct AnswerverifiedShow Answer

Chartered banks create money when they:

Correct AnswerverifiedShow Answer

Demand deposits are:

Correct AnswerverifiedShow Answer

In 2017, the value of M2++ in Canada was about:

Correct AnswerverifiedShow Answer

Correct Answer
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