Question 1

Monetary aggregates are ________.

Accepted Answer

A)  measures of the money supply reported by the Bank of Canada 
B)  measures of the wealth of individuals 
C)  never redefined since "money" never changes 
D)  reported by the Department of Finance annually 
A)  measures of the money supply reported by the Bank of Canada 
B)  measures of the wealth of individuals 
C)  never redefined since "money" never changes 
D)  reported by the Department of Finance annually

Question 2

Currency is defined as ________.

Accepted Answer

A)  anything accepted for payment of goods and services 
B)  paper money and coins 
C)  a unit of account 
D)  foreign exchange 
A)  anything accepted for payment of goods and services 
B)  paper money and coins 
C)  a unit of account 
D)  foreign exchange

Question 3

Divergent growth rates of monetary aggregates are problematic because ________.

Accepted Answer

A)  it means that monetary aggregates are not very accurate 
B)  it suggests that monetary policy is ineffective 
C)  it means that the effect of monetary policy becomes harder to predict 
D)  it suggests that the choice of monetary aggregate by policy makers does not matter 
A)  it means that monetary aggregates are not very accurate 
B)  it suggests that monetary policy is ineffective 
C)  it means that the effect of monetary policy becomes harder to predict 
D)  it suggests that the choice of monetary aggregate by policy makers does not matter

Question 4

Ranking assets from most liquid to least liquid, the correct order is ________.

Accepted Answer

A)  savings bonds; house; currency 
B)  currency; savings bonds; house 
C)  currency; house; savings bonds 
D)  house; savings bonds; currency 
A)  savings bonds; house; currency 
B)  currency; savings bonds; house 
C)  currency; house; savings bonds 
D)  house; savings bonds; currency

Question 5

If peanuts serve as a medium of exchange, a unit of account, and a store of value, then peanuts are ________.

Accepted Answer

A)  bank deposits 
B)  reserves 
C)  money 
D)  loanable funds 
A)  bank deposits 
B)  reserves 
C)  money 
D)  loanable funds

Question 6

Compared to an economy that uses a medium of exchange, in a barter economy ________.

Accepted Answer

A)  transaction costs are higher 
B)  transaction costs are lower 
C)  liquidity costs are higher 
D)  liquidity costs are lower 
A)  transaction costs are higher 
B)  transaction costs are lower 
C)  liquidity costs are higher 
D)  liquidity costs are lower

Question 7

An electronic payments system has not completely replaced the paper payments system because of all of the following reasons except ________.

Accepted Answer

A)  expensive equipment is necessary to set up the system 
B)  security concerns 
C)  privacy concerns 
D)  transportation costs 
A)  expensive equipment is necessary to set up the system 
B)  security concerns 
C)  privacy concerns 
D)  transportation costs

Question 8

Introduction of cheques into the payments system reduced the costs of exchanging goods and services. Another advantage of cheques is that ________.

Accepted Answer

A)  they provide convenient receipts for purchases 
B)  they can never be stolen 
C)  they are more widely accepted than currency 
D)  the funds from a deposited cheque are available for use immediately 
A)  they provide convenient receipts for purchases 
B)  they can never be stolen 
C)  they are more widely accepted than currency 
D)  the funds from a deposited cheque are available for use immediately

Question 9

________ is used to make purchases while ________ is the total collection of pieces of property that serve to store value.

Accepted Answer

A)  Money; income 
B)  Wealth; income 
C)  Income; money 
D)  Money; wealth 
A)  Money; income 
B)  Wealth; income 
C)  Income; money 
D)  Money; wealth

Question 10

The difference between money and income is that ________.

Accepted Answer

A)  money is a flow and income is a stock 
B)  money is a stock and income is a flow 
C)  there is no difference-money and income are both stocks 
D)  there is no difference-money and income are both flows 
A)  money is a flow and income is a stock 
B)  money is a stock and income is a flow 
C)  there is no difference-money and income are both stocks 
D)  there is no difference-money and income are both flows

Question 11

Defining money becomes ________ difficult as the pace of financial innovation ________.

Accepted Answer

A)  less; quickens 
B)  more; quickens 
C)  more; slows 
D)  more; stops 
A)  less; quickens 
B)  more; quickens 
C)  more; slows 
D)  more; stops

Question 12

Which of the following is included in both M1+ and M2?

Accepted Answer

A)  Currency 
B)  Savings deposits 
C)  Small-denomination time deposits 
D)  Money market deposit accounts 
A)  Currency 
B)  Savings deposits 
C)  Small-denomination time deposits 
D)  Money market deposit accounts

Question 13

Recent financial innovation makes the Bank of Canada's job of conducting monetary policy ________.

Accepted Answer

A)  easier, since the Bank of Canada now knows what to consider money 
B)  more difficult, since the Bank of Canada now knows what to consider money 
C)  easier, since the Bank of Canada no longer knows what to consider money 
D)  more difficult, since the Bank of Canada no longer knows what to consider money 
A)  easier, since the Bank of Canada now knows what to consider money 
B)  more difficult, since the Bank of Canada now knows what to consider money 
C)  easier, since the Bank of Canada no longer knows what to consider money 
D)  more difficult, since the Bank of Canada no longer knows what to consider money

Question 14

Of money's three functions, the one that distinguishes money from other assets is its function as a ________.

Accepted Answer

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

Question 15

Because inflation in Germany after World War I sometimes exceeded 1000 percent per month, one can conclude that the German economy suffered from ________.

Accepted Answer

A)  deflation 
B)  disinflation 
C)  hyperinflation 
D)  superdeflation 
A)  deflation 
B)  disinflation 
C)  hyperinflation 
D)  superdeflation

Question 16

Data show that an average Canadian and American citizens hold CA$1500 and US$2000 of their currency respectively. Since money is bulky, it can be stolen, pays no interest and in general we do not see our fellow Canadians holding $1500 in their pockets, where are these dollars and who is holding them?

Accepted Answer

One group that hold big amounts of curre

Question 17

As the payments system evolves from barter to a monetary system, ________.

Accepted Answer

A)  commodity money is likely to precede the use of paper currency 
B)  transaction costs increase 
C)  the number of prices that need to be calculated increase rather dramatically 
D)  specialization decreases 
A)  commodity money is likely to precede the use of paper currency 
B)  transaction costs increase 
C)  the number of prices that need to be calculated increase rather dramatically 
D)  specialization decreases

Question 18

If an individual moves money from a chequing account to a money market mutual fund, ________.

Accepted Answer

A)  M1+ decreases and M2+ increases 
B)  M1+ stays the same and M2+ increases 
C)  M1+ decreases and M2+ stays the same 
D)  M1+ increases and M2+ decreases 
A)  M1+ decreases and M2+ increases 
B)  M1+ stays the same and M2+ increases 
C)  M1+ decreases and M2+ stays the same 
D)  M1+ increases and M2+ decreases

Question 19

The formula used the Bank of Canada in calculating the money supply is ________.

Accepted Answer

A)  M = A1X1 + A2X2 + ... + AnXn 
B)  M =   
C)  M = X1 + X2 + +Xn 
D)  M =   
A)  M = A1X1 + A2X2 + ... + AnXn 
B)  M =   
C)  M = X1 + X2 + +Xn 
D)  M =

Question 20

All but the most primitive societies use money as a medium of exchange, implying that ________.

Accepted Answer

A)  the use of money is economically efficient 
B)  barter exchange is economically efficient 
C)  barter exchange cannot work outside the family 
D)  inflation is not a concern 
A)  the use of money is economically efficient 
B)  barter exchange is economically efficient 
C)  barter exchange cannot work outside the family 
D)  inflation is not a concern

Exam 3: What Is Money

Monetary aggregates are ________.

Currency is defined as ________.

Divergent growth rates of monetary aggregates are problematic because ________.

Ranking assets from most liquid to least liquid, the correct order is ________.

If peanuts serve as a medium of exchange, a unit of account, and a store of value, then peanuts are ________.

Compared to an economy that uses a medium of exchange, in a barter economy ________.

An electronic payments system has not completely replaced the paper payments system because of all of the following reasons except ________.

Introduction of cheques into the payments system reduced the costs of exchanging goods and services. Another advantage of cheques is that ________.

________ is used to make purchases while ________ is the total collection of pieces of property that serve to store value.

The difference between money and income is that ________.

Defining money becomes ________ difficult as the pace of financial innovation ________.

Which of the following is included in both M1+ and M2?

Recent financial innovation makes the Bank of Canada's job of conducting monetary policy ________.

Of money's three functions, the one that distinguishes money from other assets is its function as a ________.

Because inflation in Germany after World War I sometimes exceeded 1000 percent per month, one can conclude that the German economy suffered from ________.

As the payments system evolves from barter to a monetary system, ________.

If an individual moves money from a chequing account to a money market mutual fund, ________.

The formula used the Bank of Canada in calculating the money supply is ________.

All but the most primitive societies use money as a medium of exchange, implying that ________.

Why Study Money, Banking, and Financial Markets

An Overview of the Financial System

The Meaning of Interest Rates

The Behaviour of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, Inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

Filters

is used to make purchases while is the total collection of pieces of property that serve to store value.

Defining money becomes difficult as the pace of financial innovation .