Question 1

The average price of goods and services in the economy is called ________.

Accepted Answer

A)  the aggregate price level 
B)  inflation 
C)  interest rates 
D)  deflation 
A)  the aggregate price level 
B)  inflation 
C)  interest rates 
D)  deflation

Question 2

Complete Milton Friedman's famous statement, "Inflation is always and everywhere a ________ phenomenon."

Accepted Answer

A)  recessionary 
B)  discretionary 
C)  repressionary 
D)  monetary 
A)  recessionary 
B)  discretionary 
C)  repressionary 
D)  monetary

Question 3

A financial crisis is ________.

Accepted Answer

A)  not possible in the modern financial environment 
B)  a major disruption in the financial markets 
C)  a feature of developing economies only 
D)  typically followed by an economic boom 
A)  not possible in the modern financial environment 
B)  a major disruption in the financial markets 
C)  a feature of developing economies only 
D)  typically followed by an economic boom

Question 4

From 2002-2011, the dollar strengthened in value against other currencies. Who was helped and who was hurt by this strong dollar?

Accepted Answer

Canadian consumers benefitted because im

Question 5

Describe the relationship between the aggregate price level and the growth rate in money supply. Can the relationship be used to explain inflation?

Accepted Answer

The price level and the money supply gen

Question 6

Everything else held constant, a rise in interest rates will cause spending on housing to ________.

Accepted Answer

A)  rise 
B)  remain unchanged 
C)  either rise, fall, or remain the same 
D)  fall 
A)  rise 
B)  remain unchanged 
C)  either rise, fall, or remain the same 
D)  fall

Question 7

Stock prices, as measured by the S&P/TSX Composite Index, ________.

Accepted Answer

A)  have not changed much over time 
B)  have risen smoothly over time 
C)  have been extremely volatile over time 
D)  have declined substantially since they peaked in the mid 1980s 
A)  have not changed much over time 
B)  have risen smoothly over time 
C)  have been extremely volatile over time 
D)  have declined substantially since they peaked in the mid 1980s

Question 8

Canadian companies can borrow funds ________.

Accepted Answer

A)  only in Canadian financial markets 
B)  only in foreign financial markets 
C)  in both Canadian and foreign financial markets 
D)  only from the Canadian government 
A)  only in Canadian financial markets 
B)  only in foreign financial markets 
C)  in both Canadian and foreign financial markets 
D)  only from the Canadian government

Question 9

The bond markets are important because they are ________.

Accepted Answer

A)  easily the most widely followed financial markets in Canada 
B)  the markets where foreign exchange rates are determined 
C)  where corporations and governments borrow to finance their activities 
D)  the markets where all borrowers get their funds 
A)  easily the most widely followed financial markets in Canada 
B)  the markets where foreign exchange rates are determined 
C)  where corporations and governments borrow to finance their activities 
D)  the markets where all borrowers get their funds

Question 10

Financial institutions that accept deposits and make loans include ________.

Accepted Answer

A)  exchanges 
B)  banks 
C)  over-the-counter markets 
D)  finance companies 
A)  exchanges 
B)  banks 
C)  over-the-counter markets 
D)  finance companies

Question 11

A budget ________ occurs when government expenditures exceed tax revenues for a particular time period.

Accepted Answer

A)  deficit 
B)  surplus 
C)  surge 
D)  surfeit 
A)  deficit 
B)  surplus 
C)  surge 
D)  surfeit

Question 12

A common stock ________.

Accepted Answer

A)  cannot be purchased by individuals 
B)  is also known as a debt security 
C)  is a share of ownership in a corporation 
D)  is a claim on assets 
A)  cannot be purchased by individuals 
B)  is also known as a debt security 
C)  is a share of ownership in a corporation 
D)  is a claim on assets

Question 13

Why is it important to understand the bond market?

Accepted Answer

The bond market supports econo

Question 14

Everything else held constant, an increase in interest rates on student loans ________.

Accepted Answer

A)  may increase the cost of education 
B)  may reduce the cost of education 
C)  has no effect on educational costs 
D)  increases costs for students with no loans 
A)  may increase the cost of education 
B)  may reduce the cost of education 
C)  has no effect on educational costs 
D)  increases costs for students with no loans

Question 15

If your nominal income in 2002 is $50000, and prices increase by 50 percent between 2002 and 2013, then to have the same real income, your nominal income in 2013 must be ________.

Accepted Answer

A)  $50000 
B)  $75000 
C)  $100,000 
D)  $150,000 
A)  $50000 
B)  $75000 
C)  $100,000 
D)  $150,000

Question 16

Compared to interest rates on long-term bonds, interest rates on three-month Treasury bills fluctuate ________ and are ________ on average.

Accepted Answer

A)  more; lower 
B)  less; lower 
C)  more; higher 
D)  less; higher 
A)  more; lower 
B)  less; lower 
C)  more; higher 
D)  less; higher

Question 17

From 2002 to 2008, the Canadian dollar ________ in value.

Accepted Answer

A)  appreciated by approximately 25% 
B)  appreciated by approximately 50% 
C)  depreciated by approximately 50% 
D)  depreciated by approximately 25% 
A)  appreciated by approximately 25% 
B)  appreciated by approximately 50% 
C)  depreciated by approximately 50% 
D)  depreciated by approximately 25%

Question 18

________ markets transfer funds from people who do not have a productive use for them to people who do.

Accepted Answer

A)  Commodity 
B)  Fund-available 
C)  Financial 
D)  Derivative exchange 
A)  Commodity 
B)  Fund-available 
C)  Financial 
D)  Derivative exchange

Question 19

The cost of borrowing is commonly referred to as the ________.

Accepted Answer

A)  inflation rate 
B)  exchange rate 
C)  interest rate 
D)  aggregate price level 
A)  inflation rate 
B)  exchange rate 
C)  interest rate 
D)  aggregate price level

Question 20

Which of the following is most likely to result from a stronger Canadian dollar?

Accepted Answer

A)  Canadian goods exported aboard will cost less in foreign countries, and so foreigners will buy more of them. 
B)  Canadian goods exported aboard will cost more in foreign countries and so foreigners will buy more of them. 
C)  Canadian goods exported abroad will cost more in foreign countries, and so foreigners will buy fewer of them. 
D)  Canadians will purchase fewer foreign goods. 
A)  Canadian goods exported aboard will cost less in foreign countries, and so foreigners will buy more of them. 
B)  Canadian goods exported aboard will cost more in foreign countries and so foreigners will buy more of them. 
C)  Canadian goods exported abroad will cost more in foreign countries, and so foreigners will buy fewer of them. 
D)  Canadians will purchase fewer foreign goods.

Exam 1: Why Study Money, Banking, and Financial Markets

The average price of goods and services in the economy is called ________.

Complete Milton Friedman's famous statement, "Inflation is always and everywhere a ________ phenomenon."

A financial crisis is ________.

From 2002-2011, the dollar strengthened in value against other currencies. Who was helped and who was hurt by this strong dollar?

Describe the relationship between the aggregate price level and the growth rate in money supply. Can the relationship be used to explain inflation?

Everything else held constant, a rise in interest rates will cause spending on housing to ________.

Stock prices, as measured by the S&P/TSX Composite Index, ________.

Canadian companies can borrow funds ________.

The bond markets are important because they are ________.

Financial institutions that accept deposits and make loans include ________.

A budget ________ occurs when government expenditures exceed tax revenues for a particular time period.

A common stock ________.

Why is it important to understand the bond market?

Everything else held constant, an increase in interest rates on student loans ________.

If your nominal income in 2002 is $50000, and prices increase by 50 percent between 2002 and 2013, then to have the same real income, your nominal income in 2013 must be ________.

Compared to interest rates on long-term bonds, interest rates on three-month Treasury bills fluctuate ________ and are ________ on average.

From 2002 to 2008, the Canadian dollar ________ in value.

________ markets transfer funds from people who do not have a productive use for them to people who do.

The cost of borrowing is commonly referred to as the ________.

Which of the following is most likely to result from a stronger Canadian dollar?

An Overview of the Financial System

What Is Money

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

Compared to interest rates on long-term bonds, interest rates on three-month Treasury bills fluctuate and are on average.