Question 1

How could the Bank of Canada increase the money supply?

Accepted Answer

A)  sell government bonds
B)  decrease the bank rate
C)  increase the reserve requirement
D)  increase the bank rateE) C) and D)
F) A) and D)

Question 2

Use the balance sheet for the following questions.
Table 29-3
 
-Refer to Table 29-3. If the Last Bank of Cedar Bend is holding $5000 in excess reserves, what is the reserve requirement?

Accepted Answer

A)  1/7
B)  1/8
C)  1/9
D)  1/10E) A) and C)
F) B) and D)

Question 3

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 4

How are savings deposits treated in M1 as compared to M2?

Accepted Answer

A)  They are included in M1 but not M2.
B)  They are included in M2 but not M1.
C)  They are included in M1 and M2.
D)  They are included in neither M1 nor M2.E) A) and D)
F) A) and C)

Question 5

Which of the following 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.E) A) and D)
F) All of the above

Question 6

As banks create money, they create wealth.

Accepted Answer

A) True 
 B)False

Question 7

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 8

Which of the following 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 valueE) A) and C)
F) None of the above

Question 9

If the reserve ratio is 10 percent and a bank receives a new deposit of $800, which of the following will this bank most likely do?

Accepted Answer

A)  It will increase its required reserves by $8000.
B)  It will make new loans of $8000.
C)  It will be able to make new loans of $800.
D)  It will initially see its total reserves increase by $800.E) A) and D)
F) A) and C)

Question 10

Suppose the banking system has $10 million in reserves, the reserve requirement is 20 percent, and there are no excess reserves. The public holds $10 million in cash. Then bankers decide that it is prudent to hold some excess reserves, and so begin to hold 25 percent of deposits in the form of reserves. At the same time, the public decides to withdraw $5 million in currency from the banking system. Other things the same, what will these actions cause the money supply to do?

Accepted Answer

A)  to change forms, but not size
B)  to fall by $10 million
C)  to fall by $25 million
D)  to fall by $35 millionE) C) and D)
F) None of the above

Question 11

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.E) A) and B)
F) A) and C)

Question 12

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.E) All of the above
F) None of the above

Question 13

Suppose that the reserve ratio is 7 percent and that a bank has $2000 in deposits. What are its required reserves?

Accepted Answer

A)  $100
B)  $120
C)  $140
D)  $160E) A) and D)
F) A) and C)

Question 14

If the reserve ratio is 10 percent, how much new money can $1000 of excess reserves create?

Accepted Answer

A)  $100
B)  $1000
C)  $10 000
D)  $100 000E) A) and D)
F) None of the above

Question 15

On which of the following do the Bank of Canada's policy decisions have an important influence?

Accepted Answer

A)  both the rate of inflation and the level of employment in the short run
B)  the rate of inflation in the long run and the level of employment in the short run
C)  the rate of inflation in the short run and the level of employment in the long run
D)  both the rate of inflation and the level of employment in both the short run and the long runE) B) and C)
F) A) and D)

Question 16

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

Accepted Answer

A)  demand deposits
B)  corporate bonds
C)  currency
D)  term depositsE) A) and D)
F) A) and B)

Question 17

Which of the three functions of money are met by each of the following assets in the Canadian economy?
a.paper dollar
b.precious metals
c.collectibles such as baseball cards, stamps, and antiques

Accepted Answer

a.medium of exchange...

Question 18

Table 29-5 The following information pertains to the Bank of Kingston.
 
-Refer to Table 29-5. 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 Kingston decides to hold reserves of 4 percent, by how much would the economy's money supply increase?

Accepted Answer

A)  $50 200
B)  $60 000
C)  $62 000
D)  $65 400E) C) and D)
F) B) and D)

Question 19

M2 is both larger and more liquid than M1.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)  It would rise from10 to 20.
B)  It would rise from 5 to 10.
C)  It would fall from 10 to 5.
D)  It would not change.E) B) and C)
F) A) and B)

Exam 10: The Monetary System

Suppose that the reserve ratio is 7 percent and that a bank has $2000 in deposits. What are its required reserves?

Correct Answer
verified

As banks create money, they create wealth.

Correct Answer
verified

Which of the three functions of money are met by each of the following assets in the Canadian economy? a.paper dollar b.precious metals c.collectibles such as baseball cards, stamps, and antiques

Correct Answer
verified
a.medium of exchange...
View Answer

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

Correct Answer
verified

Which of the following is the fundamental function of credit cards?

Correct Answer
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Use the balance sheet for the following questions. Table 29-3 -Refer to Table 29-3. If the Last Bank of Cedar Bend is holding $5000 in excess reserves, what is the reserve requirement?

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified
The reserve ratio is the percent of depo...
View Answer

Correct Answer
verified

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

Correct Answer
verified

On which of the following do the Bank of Canada's policy decisions have an important influence?

Correct Answer
verified

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

Correct Answer
verified

Which of the following is current Canadian currency?

Correct Answer
verified

If the reserve ratio is 10 percent, how much new money can $1000 of excess reserves create?

Correct Answer
verified

M2 is both larger and more liquid than M1.

Correct Answer
verified

How are savings deposits treated in M1 as compared to M2?

Correct Answer
verified

If the reserve ratio is 10 percent and a bank receives a new deposit of $800, which of the following will this bank most likely do?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

How could the Bank of Canada increase the money supply?

Correct Answer
verified

Exam 10: The Monetary System

Suppose that the reserve ratio is 7 percent and that a bank has $2000 in deposits. What are its required reserves?

Correct AnswerverifiedShow Answer

As banks create money, they create wealth.

Correct AnswerverifiedShow Answer

Which of the three functions of money are met by each of the following assets in the Canadian economy? a.paper dollar b.precious metals c.collectibles such as baseball cards, stamps, and antiques

Correct Answerverifieda.medium of exchange...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is the fundamental function of credit cards?

Correct AnswerverifiedShow Answer

Use the balance sheet for the following questions. Table 29-3 -Refer to Table 29-3. If the Last Bank of Cedar Bend is holding $5000 in excess reserves, what is the reserve requirement?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedThe reserve ratio is the percent of depo...View AnswerShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

On which of the following do the Bank of Canada's policy decisions have an important influence?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is current Canadian currency?

Correct AnswerverifiedShow Answer

If the reserve ratio is 10 percent, how much new money can $1000 of excess reserves create?

Correct AnswerverifiedShow Answer

M2 is both larger and more liquid than M1.

Correct AnswerverifiedShow Answer

How are savings deposits treated in M1 as compared to M2?

Correct AnswerverifiedShow Answer

If the reserve ratio is 10 percent and a bank receives a new deposit of $800, which of the following will this bank most likely do?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

How could the Bank of Canada increase the money supply?

Correct AnswerverifiedShow Answer

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Correct Answer
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a.medium of exchange...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The reserve ratio is the percent of depo...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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