Question 1

The Bank of Canada was created in 1934 in the wake of the Great Depression.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following best defines reserve requirements?

Accepted Answer

A)  They are regulations concerning the amount banks are allowed to borrow from the central bank.
B)  They are regulations concerning the amount of reserves banks must hold against deposits.
C)  They are regulations concerning reserves banks must hold based on the number and type of loans they make.
D)  They are regulations concerning the interest rate at which banks can borrow from the central bank.E) All of the above
F) A) and D)

Question 3

During what period can the Bank of Canada influence unemployment?

Accepted Answer

A)  in the short and long run
B)  in the short run, but not the long run
C)  in the long run, but not the short run
D)  in neither the short nor long runE) B) and D)
F) B) and C)

Question 4

Which of the following has intrinsic value?

Accepted Answer

A)  a golden coin
B)  a twenty-dollar bill
C)  a bank account
D)  a personal chequeE) A) and B)
F) A) and C)

Question 5

Joe wants to trade eggs for sausage. Lashonda wants to trade eggs for orange juice. Joe and Lashonda have a double coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 6

Use the balance sheet below for the following questions.
Table 29-2
 
-Refer to Table 29-2. If $1000 is deposited into the First Bank of Mason City, which of the following happens?

Accepted Answer

A)  Total reserves will initially increase by $200.
B)  Liabilities will decrease by $1000.
C)  Assets will increase by $1000.
D)  Required reserves will increase by $800.E) A) and B)
F) All of the above

Question 7

When the Bank of Canada conducts open market purchases, how do commercial banks' assets most likely change?

Accepted Answer

A)  Reserves increase and banks increase lending.
B)  Reserves increase and banks decrease lending.
C)  Reserves decrease and banks increase lending.
D)  Reserves decrease and banks decrease lending.E) A) and D)
F) A) and C)

Question 8

In an economy that relies on barter, trade requires a double coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 9

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)  $6667E) All of the above
F) B) and C)

Question 10

Which of the following is most likely to happen under a fractional reserve banking system?

Accepted Answer

A)  Banks hold more reserves than deposits.
B)  Banks generally lend out a majority of the funds deposited.
C)  Banks cause the money supply to fall by lending out reserves.
D)  Banks only accept savings deposits.E) A) and B)
F) A) and C)

Question 11

Which of the following best characterizes credit cards?

Accepted Answer

A)  They are a payment form of money.
B)  They are part of the M1 money supply.
C)  They are a method of deferring payment.
D)  They are a unit of account.E) B) and D)
F) A) and C)

Question 12

Which of the following best explains the role of the Bank of Canada?

Accepted Answer

A)  It maintains a target exchange rate.
B)  It determines the bank rate.
C)  It makes loans to large corporations.
D)  It controls the government budget deficit.E) A) and B)
F) None of the above

Question 13

Which of the following is included in the M2 definition of the money supply?

Accepted Answer

A)  credit cards
B)  term deposits
C)  corporate bonds
D)  foreign currency accountsE) A) and B)
F) B) and C)

Question 14

What does the text mean by, and how does it answer the question, "Where Is All the Currency?"

Accepted Answer

The amount of currency per person is ove...

Question 15

If the reserve ratio is 10 percent, what is the money multiplier?

Accepted Answer

A)  100
B)  10
C)  9/10
D)  1/10E) A) and B)
F) A) and D)

Question 16

Which of the following plays the role of a central bank in Canada?

Accepted Answer

A)  TD Canada Trust
B)  the Bank of Montreal
C)  the Bank of Canada
D)  the Royal Bank of CanadaE) A) and C)
F) C) and D)

Question 17

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 18

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 19

Which of the following best describes the consequences of open market sales 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)  Bank reserves decrease and the money supply increases.
D)  Bank reserves decrease and the money supply decreases.E) None of the above
F) All of the above

Question 20

When a bank loans out $1000, what happens to the money supply?

Accepted Answer

A)  It does not change.
B)  It decreases.
C)  It increases.
D)  It has an indeterminate effect on the money supply.E) A) and B)
F) B) and C)

Exam 10: The Monetary System

Which of the following is included in the M2 definition of the money supply?

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If the reserve ratio is 10 percent, what is the money multiplier?

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Which of the following best describes the consequences of open market sales conducted by the Bank of Canada?

Correct AnswerverifiedShow Answer

Which of the following is most likely to happen under a fractional reserve banking system?

Correct AnswerverifiedShow Answer

Use the balance sheet below for the following questions. Table 29-2 -Refer to Table 29-2. If $1000 is deposited into the First Bank of Mason City, which of the following happens?

Correct AnswerverifiedShow Answer

Which of the following has intrinsic value?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedNeither credit cards nor debit cards are...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Joe wants to trade eggs for sausage. Lashonda wants to trade eggs for orange juice. Joe and Lashonda have a double coincidence of wants.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedWhen the reserve requirement is less tha...View AnswerShow Answer

The Bank of Canada was created in 1934 in the wake of the Great Depression.

Correct AnswerverifiedShow Answer

In an economy that relies on barter, trade requires a double coincidence of wants.

Correct AnswerverifiedShow Answer

During what period can the Bank of Canada influence unemployment?

Correct AnswerverifiedShow Answer

When the Bank of Canada conducts open market purchases, how do commercial banks' assets most likely change?

Correct AnswerverifiedShow Answer

Which of the following best defines reserve requirements?

Correct AnswerverifiedShow Answer

Which of the following plays the role of a central bank in Canada?

Correct AnswerverifiedShow Answer

Which of the following best explains the role of the Bank of Canada?

Correct AnswerverifiedShow Answer

What does the text mean by, and how does it answer the question, "Where Is All the Currency?"

Correct AnswerverifiedThe amount of currency per person is ove...View AnswerShow Answer

Which of the following best characterizes credit cards?

Correct AnswerverifiedShow Answer

When a bank loans out $1000, what happens to the money supply?

Correct AnswerverifiedShow Answer

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Neither credit cards nor debit cards are...
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When the reserve requirement is less tha...
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The amount of currency per person is ove...
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