Question 1

If R < q, then

Accepted Answer

A)  the marginal cost of using the credit card exceeds the marginal benefit. 
B)  the marginal benefit of using cash exceeds the marginal cost. 
C)  the real interest rate does not reach its equilibrium value. 
D)  the nominal interest rate is not in equilibrium. 
E)  the marginal benefit of using the credit card exceeds the marginal cost. 
A)  the marginal cost of using the credit card exceeds the marginal benefit. 
B)  the marginal benefit of using cash exceeds the marginal cost. 
C)  the real interest rate does not reach its equilibrium value. 
D)  the nominal interest rate is not in equilibrium. 
E)  the marginal benefit of using the credit card exceeds the marginal cost.

Question 2

Lower inflation over the long run tends to be associated with

Accepted Answer

A)  more international trade. 
B)  lower nominal interest rates. 
C)  higher real interest rates. 
D)  higher government spending. 
E)  lower taxation. 
A)  more international trade. 
B)  lower nominal interest rates. 
C)  higher real interest rates. 
D)  higher government spending. 
E)  lower taxation.

Question 3

The demand for money is determined by

Accepted Answer

A)  the behaviour of the government. 
B)  the behaviour of the chartered banks. 
C)  the behaviour of the Bank of Canada. 
D)  the behaviour of the consumer and the firm. 
E)  the behaviour of the private sector. 
A)  the behaviour of the government. 
B)  the behaviour of the chartered banks. 
C)  the behaviour of the Bank of Canada. 
D)  the behaviour of the consumer and the firm. 
E)  the behaviour of the private sector.

Question 4

To increase the nominal money supply, the government can

Accepted Answer

A)  drop money out of helicopters. 
B)  increase government spending and taxes by the same amount. 
C)  reduce the quantity of government bonds, with an increase in government spending or taxes. 
D)  temporarily increase government spending, with an increase in either taxes or the quantity of government bonds. 
E)  engage in open market sales of interest-bearing debt. 
A)  drop money out of helicopters. 
B)  increase government spending and taxes by the same amount. 
C)  reduce the quantity of government bonds, with an increase in government spending or taxes. 
D)  temporarily increase government spending, with an increase in either taxes or the quantity of government bonds. 
E)  engage in open market sales of interest-bearing debt.

Question 5

Which of the following is an example of the role of banks?

Accepted Answer

A)  financial intermediaries 
B)  create money 
C)  manage stock portfolios 
D)  manage the money supply 
E)  help control the amount of currency in circulation 
A)  financial intermediaries 
B)  create money 
C)  manage stock portfolios 
D)  manage the money supply 
E)  help control the amount of currency in circulation

Question 6

The double coincidence of wants problem is solved by

Accepted Answer

A)  credit markets. 
B)  government intervention. 
C)  the use of money. 
D)  specialization. 
E)  monetary aggregates. 
A)  credit markets. 
B)  government intervention. 
C)  the use of money. 
D)  specialization. 
E)  monetary aggregates.

Question 7

Quantitative easing may work because

Accepted Answer

A)  it eases the strain on the government surplus. 
B)  on net, this increases the effective quantity of liquid assets in the economy. 
C)  open market operations always work at the zero lower bound. 
D)  interest rate increases are not an option. 
E)  the central bank says they will. 
A)  it eases the strain on the government surplus. 
B)  on net, this increases the effective quantity of liquid assets in the economy. 
C)  open market operations always work at the zero lower bound. 
D)  interest rate increases are not an option. 
E)  the central bank says they will.

Question 8

The nominal interest rate cannot fall below zero because

Accepted Answer

A)  central banks are engaged in interest rate targeting. 
B)  inflation is generally too high. 
C)  inflation is generally too low. 
D)  financial markets cannot allow for arbitrage opportunities. 
E)  financial markets do allow for arbitrage opportunities. 
A)  central banks are engaged in interest rate targeting. 
B)  inflation is generally too high. 
C)  inflation is generally too low. 
D)  financial markets cannot allow for arbitrage opportunities. 
E)  financial markets do allow for arbitrage opportunities.

Question 9

Negative nominal interest rates

Accepted Answer

A)  are part of conventional monetary policy. 
B)  cannot happen because of the zero lower bound. 
C)  can be implemented because the effective lower bound is negative. 
D)  will reduce investment. 
E)  are not unconventional monetary policy. 
A)  are part of conventional monetary policy. 
B)  cannot happen because of the zero lower bound. 
C)  can be implemented because the effective lower bound is negative. 
D)  will reduce investment. 
E)  are not unconventional monetary policy.

Question 10

An open-market operation refers to

Accepted Answer

A)  changing the money supply by changing taxes. 
B)  changing the money supply by changing government spending. 
C)  an exchange of money for interest-bearing debt by the monetary authority. 
D)  an exchange of domestic money for foreign money by the monetary authority. 
E)  seigniorage. 
A)  changing the money supply by changing taxes. 
B)  changing the money supply by changing government spending. 
C)  an exchange of money for interest-bearing debt by the monetary authority. 
D)  an exchange of domestic money for foreign money by the monetary authority. 
E)  seigniorage.

Question 11

The marginal cost of financial transactions rises with the volume of financial transactions due to

Accepted Answer

A)  congestion. 
B)  power failure. 
C)  perceived instability of banks. 
D)  reserve requirements. 
E)  bank failure. 
A)  congestion. 
B)  power failure. 
C)  perceived instability of banks. 
D)  reserve requirements. 
E)  bank failure.

Question 12

Real money demand depends

Accepted Answer

A)  positively on the inflation rate. 
B)  positively on the consumer's savings rate. 
C)  positively on the nominal interest rate. 
D)  negatively on the inflation rate. 
E)  negatively on the nominal interest rate. 
A)  positively on the inflation rate. 
B)  positively on the consumer's savings rate. 
C)  positively on the nominal interest rate. 
D)  negatively on the inflation rate. 
E)  negatively on the nominal interest rate.

Question 13

Use of money to save up for a future cash purchase would be an example of money's role as a

Accepted Answer

A)  medium of exchange. 
B)  store of value. 
C)  unit of account. 
D)  store of wealth. 
E)  standard of deferred payment. 
A)  medium of exchange. 
B)  store of value. 
C)  unit of account. 
D)  store of wealth. 
E)  standard of deferred payment.

Question 14

Real money demand is a function of

Accepted Answer

A)  the level of transactions in the economy. 
B)  increasing real income. 
C)  increasing real income and decreasing nominal interest rates. 
D)  increasing real income and decreasing inflation rates. 
E)  increasing real income and increasing inflation rates. 
A)  the level of transactions in the economy. 
B)  increasing real income. 
C)  increasing real income and decreasing nominal interest rates. 
D)  increasing real income and decreasing inflation rates. 
E)  increasing real income and increasing inflation rates.

Question 15

The most distinguishing economic feature of money is its

Accepted Answer

A)  medium of exchange role. 
B)  store of value role. 
C)  unit of account role. 
D)  store of wealth role. 
E)  standard of deferred payment role. 
A)  medium of exchange role. 
B)  store of value role. 
C)  unit of account role. 
D)  store of wealth role. 
E)  standard of deferred payment role.

Question 16

Money supply targeting

Accepted Answer

A)  performs poorly. 
B)  is used by most monetary authorities today. 
C)  will result in a high rate of inflation. 
D)  is very successful in maintaining price stability. 
E)  is superior to nominal interest rate targeting in maintaining price stability. 
A)  performs poorly. 
B)  is used by most monetary authorities today. 
C)  will result in a high rate of inflation. 
D)  is very successful in maintaining price stability. 
E)  is superior to nominal interest rate targeting in maintaining price stability.

Question 17

Price tags attached to goods for purchase at a store would be an example of money's role as a

Accepted Answer

A)  medium of exchange. 
B)  store of value. 
C)  unit of account. 
D)  store of wealth. 
E)  standard of deferred payment. 
A)  medium of exchange. 
B)  store of value. 
C)  unit of account. 
D)  store of wealth. 
E)  standard of deferred payment.

Question 18

An increase in the perceived instability of banks

Accepted Answer

A)  decreases the demand for money. 
B)  increases the demand for money. 
C)  leads to bank failure. 
D)  increases people's dependence on banks for transactions. 
E)  led to the elimination of reserve requirements in 1992. 
A)  decreases the demand for money. 
B)  increases the demand for money. 
C)  leads to bank failure. 
D)  increases people's dependence on banks for transactions. 
E)  led to the elimination of reserve requirements in 1992.

Question 19

Neutrality of money refers to

Accepted Answer

A)  a certain percentage change in the money supply has the same percentage change in economic activity. 
B)  a one-time change in the money supply has a one-time change in economic activity. 
C)  a one-time change in the money supply affects consumption and investment decisions only. 
D)  a one-time change in the money supply has no real consequence for the economy. 
E)  money being a medium of exchange for everyone. 
A)  a certain percentage change in the money supply has the same percentage change in economic activity. 
B)  a one-time change in the money supply has a one-time change in economic activity. 
C)  a one-time change in the money supply affects consumption and investment decisions only. 
D)  a one-time change in the money supply has no real consequence for the economy. 
E)  money being a medium of exchange for everyone.

Question 20

Which one of the following is included in M3, but not in M2?

Accepted Answer

A)  Bank of Canada term deposits 
B)  foreign currency deposits of residents of Canada 
C)  Canadian currency held by foreigners 
D)  Eurodollars 
E)  personal term deposits 
A)  Bank of Canada term deposits 
B)  foreign currency deposits of residents of Canada 
C)  Canadian currency held by foreigners 
D)  Eurodollars 
E)  personal term deposits

If R < q, then

Lower inflation over the long run tends to be associated with

The demand for money is determined by

To increase the nominal money supply, the government can

Which of the following is an example of the role of banks?

The double coincidence of wants problem is solved by

Quantitative easing may work because

The nominal interest rate cannot fall below zero because

Negative nominal interest rates

An open-market operation refers to

The marginal cost of financial transactions rises with the volume of financial transactions due to

Real money demand depends

Use of money to save up for a future cash purchase would be an example of money's role as a

Real money demand is a function of

The most distinguishing economic feature of money is its

Money supply targeting

Price tags attached to goods for purchase at a store would be an example of money's role as a

An increase in the perceived instability of banks

Neutrality of money refers to

Which one of the following is included in M3, but not in M2?

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behaviour: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters

Exam 12: A Monetary Intertemporal Model: Money, Banking, Prices, and Monetary Policy

If R < q, then

Lower inflation over the long run tends to be associated with

The demand for money is determined by

To increase the nominal money supply, the government can

Which of the following is an example of the role of banks?

The double coincidence of wants problem is solved by

Quantitative easing may work because

The nominal interest rate cannot fall below zero because

Negative nominal interest rates

An open-market operation refers to

The marginal cost of financial transactions rises with the volume of financial transactions due to

Real money demand depends

Use of money to save up for a future cash purchase would be an example of money's role as a

Real money demand is a function of

The most distinguishing economic feature of money is its

Money supply targeting

Price tags attached to goods for purchase at a store would be an example of money's role as a

An increase in the perceived instability of banks

Neutrality of money refers to

Which one of the following is included in M3, but not in M2?

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behaviour: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters