Question 1

When the Bank of Canada sells government securities to a bank, how are the Bank of Canada's assets affected?

Accepted Answer

A) Bank of Canada notes increase. 
B) The bank's reserves held at the Bank of Canada increase. 
C) The amount of the Bank of Canada's government securities decreases. 
D) The amount of the Bank of Canada's government securities increases. 
E) The bank's reserves held at the Bank of Canada decrease. 
A) Bank of Canada notes increase. 
B) The bank's reserves held at the Bank of Canada increase. 
C) The amount of the Bank of Canada's government securities decreases. 
D) The amount of the Bank of Canada's government securities increases. 
E) The bank's reserves held at the Bank of Canada decrease.

Question 2

Which of the following best fits the definition of money?

Accepted Answer

A) any medium of exchange 
B) an obligation between the parties to a transaction 
C) gold 
D) any commodity or token that is generally acceptable as a means of payment 
E) any unit of account 
A) any medium of exchange 
B) an obligation between the parties to a transaction 
C) gold 
D) any commodity or token that is generally acceptable as a means of payment 
E) any unit of account

Question 3

The money multiplier can also be calculated as _______, where a is the currency drain ratio and b is the desired reserve ratio.

Accepted Answer

A) a + b)÷ 1 + b) 
B) a + b)÷ 1 + a) 
C) 1 + b)÷ a + b) 
D) a ÷ a + b) 
E) 1 + a)÷ a + b) 
A) a + b)÷ 1 + b) 
B) a + b)÷ 1 + a) 
C) 1 + b)÷ a + b) 
D) a ÷ a + b) 
E) 1 + a)÷ a + b)

Question 4

The opportunity cost of holding currency is

Accepted Answer

A) consumption given up. 
B) the nominal interest rate. 
C) the inflation rate. 
D) the real interest rate. 
E) the price level. 
A) consumption given up. 
B) the nominal interest rate. 
C) the inflation rate. 
D) the real interest rate. 
E) the price level.

Question 5

The reserves of a bank include

Accepted Answer

A) the cash in its vault plus any deposits held on account with the Bank of Canada plus the value of any government bonds that it holds. 
B) the cash in its vault plus the value of its chequable deposits. 
C) the cash in its vault plus any deposits held on account at the Bank of Canada. 
D) the cash in its vault plus any gold held for the bank at the Bank of Canada. 
E) all of its common stock holdings, the cash in its vault, and all deposits held on account with the Bank of Canada. 
A) the cash in its vault plus any deposits held on account with the Bank of Canada plus the value of any government bonds that it holds. 
B) the cash in its vault plus the value of its chequable deposits. 
C) the cash in its vault plus any deposits held on account at the Bank of Canada. 
D) the cash in its vault plus any gold held for the bank at the Bank of Canada. 
E) all of its common stock holdings, the cash in its vault, and all deposits held on account with the Bank of Canada.

Question 6

Which of the following is a store of value?

Accepted Answer

A) fresh fruit and vegetables 
B) a cheque 
C) a debit card 
D) a fixed term deposit 
E) a credit card 
A) fresh fruit and vegetables 
B) a cheque 
C) a debit card 
D) a fixed term deposit 
E) a credit card

Question 7

When the nominal interest rate rises, the opportunity cost of holding money

Accepted Answer

A) falls and people hold less money. 
B) rises and people hold more money. 
C) rises and people hold less money. 
D) falls and people hold more money. 
E) does not change. 
A) falls and people hold less money. 
B) rises and people hold more money. 
C) rises and people hold less money. 
D) falls and people hold more money. 
E) does not change.

Question 8

Which of the following will increase the size of the money multiplier?

Accepted Answer

A) a decrease in the desired reserve ratio 
B) an increase in the desired reserve ratio 
C) a decrease in the currency drain ratio 
D) an increase in the currency drain ratio 
E) either A or C 
A) a decrease in the desired reserve ratio 
B) an increase in the desired reserve ratio 
C) a decrease in the currency drain ratio 
D) an increase in the currency drain ratio 
E) either A or C

Question 9

If the price level doubles, all else constant, the quantity of

Accepted Answer

A) nominal money demanded will half. 
B) real money demanded will double. 
C) real money demanded will half. 
D) nominal money demanded will double. 
E) nominal money demanded will remain constant. 
A) nominal money demanded will half. 
B) real money demanded will double. 
C) real money demanded will half. 
D) nominal money demanded will double. 
E) nominal money demanded will remain constant.

Question 10

Suppose that the desired reserve ratio is 0.25 and the currency drain ratio is 0.25.The money multiplier is

Accepted Answer

A) 2.50. 
B) 1.40. 
C) 2.08. 
D) 1.71. 
E) 2.40. 
A) 2.50. 
B) 1.40. 
C) 2.08. 
D) 1.71. 
E) 2.40.

Question 11

Which one of the following is not an economic benefit provided by depository institutions?

Accepted Answer

A) pooling risk 
B) providing a place for reserve account deposits 
C) lowering the cost of monitoring borrowers 
D) lowering the cost of borrowing 
E) creating liquidity 
A) pooling risk 
B) providing a place for reserve account deposits 
C) lowering the cost of monitoring borrowers 
D) lowering the cost of borrowing 
E) creating liquidity

Question 12

The Bank of Canada makes an open market purchase to

Accepted Answer

A) decrease the monetary base. 
B) increase the monetary base. 
C) increase Bank of Canada notes. 
D) raise interest rates. 
E) decrease bank reserves. 
A) decrease the monetary base. 
B) increase the monetary base. 
C) increase Bank of Canada notes. 
D) raise interest rates. 
E) decrease bank reserves.

Question 13

The riskiest assets for a chartered bank are

Accepted Answer

A) securities. 
B) Government of Canada Treasury bills. 
C) reserves. 
D) loans. 
E) Government of Canada bonds. 
A) securities. 
B) Government of Canada Treasury bills. 
C) reserves. 
D) loans. 
E) Government of Canada bonds.

Question 14

Which one of the following is not a depository institution?

Accepted Answer

A) The Bank of Montreal 
B) a caisse populaire 
C) The Bank of Canada 
D) Canada Trust 
E) a credit union 
A) The Bank of Montreal 
B) a caisse populaire 
C) The Bank of Canada 
D) Canada Trust 
E) a credit union

Question 15

If Wolfgang transfers $1,000 out of his non- chequable deposit account and places it in his chequable deposit account,

Accepted Answer

A) M1 and M2 fall. 
B) M1 rises and M2 remains the same. 
C) M1 falls and M3 rises. 
D) M1 falls and M2 rises. 
E) M1 falls and M2 remains the same. 
A) M1 and M2 fall. 
B) M1 rises and M2 remains the same. 
C) M1 falls and M3 rises. 
D) M1 falls and M2 rises. 
E) M1 falls and M2 remains the same.

Question 16

Money market equilibrium occurs

Accepted Answer

A) when the level of real GDP is constant. 
B) when bond prices are constant. 
C) only under a fixed exchange rate. 
D) when the quantity of real money supplied equals the quantity of real money demanded. 
E) when interest rates are constant. 
A) when the level of real GDP is constant. 
B) when bond prices are constant. 
C) only under a fixed exchange rate. 
D) when the quantity of real money supplied equals the quantity of real money demanded. 
E) when interest rates are constant.

Question 17

Anything can be money as long as it

Accepted Answer

A) has low transactions costs. 
B) is acceptable as a medium of exchange. 
C) meets the double coincidence of wants. 
D) has intrinsic worth. 
E) is not too bulky. 
A) has low transactions costs. 
B) is acceptable as a medium of exchange. 
C) meets the double coincidence of wants. 
D) has intrinsic worth. 
E) is not too bulky.

Question 18

The opportunity cost of holding money increases when the

Accepted Answer

A) income of consumers increases. 
B) nominal interest rate rises. 
C) purchasing power of money increases. 
D) income of consumers decreases. 
E) price of goods and services decrease. 
A) income of consumers increases. 
B) nominal interest rate rises. 
C) purchasing power of money increases. 
D) income of consumers decreases. 
E) price of goods and services decrease.

Question 19

Real GDP is $2,560 billion, the GDP deflator is 125 a price level of 1.25), and the velocity of circulation is 5.The quantity of money is

Accepted Answer

A) $640 billion. 
B) $400 billion. 
C) $625 billion. 
D) $2,048 billion. 
E) $20.48 billion. 
A) $640 billion. 
B) $400 billion. 
C) $625 billion. 
D) $2,048 billion. 
E) $20.48 billion.

Question 20

International evidence shows us that

Accepted Answer

A) there is a general tendency for money growth and inflation to be inversely related, and the quantity theory is a poor predictor of inflation. 
B) in the long run a 1 percent increase in the growth rate of money causes a 1 percent increase in inflation. 
C) money growth and inflation are always rising, and the quantity theory predicts inflation accurately. 
D) there is a general tendency for money growth and inflation to be correlated, but the quantity theory does not predict inflation precisely. 
E) there is a general tendency for money growth and inflation to be correlated, and the quantity theory predicts inflation precisely. 
A) there is a general tendency for money growth and inflation to be inversely related, and the quantity theory is a poor predictor of inflation. 
B) in the long run a 1 percent increase in the growth rate of money causes a 1 percent increase in inflation. 
C) money growth and inflation are always rising, and the quantity theory predicts inflation accurately. 
D) there is a general tendency for money growth and inflation to be correlated, but the quantity theory does not predict inflation precisely. 
E) there is a general tendency for money growth and inflation to be correlated, and the quantity theory predicts inflation precisely.

When the Bank of Canada sells government securities to a bank, how are the Bank of Canada's assets affected?

Which of the following best fits the definition of money?

The money multiplier can also be calculated as _______, where a is the currency drain ratio and b is the desired reserve ratio.

The opportunity cost of holding currency is

The reserves of a bank include

Which of the following is a store of value?

When the nominal interest rate rises, the opportunity cost of holding money

Which of the following will increase the size of the money multiplier?

If the price level doubles, all else constant, the quantity of

Suppose that the desired reserve ratio is 0.25 and the currency drain ratio is 0.25.The money multiplier is

Which one of the following is not an economic benefit provided by depository institutions?

The Bank of Canada makes an open market purchase to

The riskiest assets for a chartered bank are

Which one of the following is not a depository institution?

If Wolfgang transfers $1,000 out of his non- chequable deposit account and places it in his chequable deposit account,

Money market equilibrium occurs

Anything can be money as long as it

The opportunity cost of holding money increases when the

Real GDP is $2,560 billion, the GDP deflator is 125 a price level of 1.25), and the velocity of circulation is 5.The quantity of money is

International evidence shows us that

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 8: Money, the Price Level, and Inflation

When the Bank of Canada sells government securities to a bank, how are the Bank of Canada's assets affected?

Which of the following best fits the definition of money?

The money multiplier can also be calculated as _______, where a is the currency drain ratio and b is the desired reserve ratio.

The opportunity cost of holding currency is

The reserves of a bank include

Which of the following is a store of value?

When the nominal interest rate rises, the opportunity cost of holding money

Which of the following will increase the size of the money multiplier?

If the price level doubles, all else constant, the quantity of

Suppose that the desired reserve ratio is 0.25 and the currency drain ratio is 0.25.The money multiplier is

Which one of the following is not an economic benefit provided by depository institutions?

The Bank of Canada makes an open market purchase to

The riskiest assets for a chartered bank are

Which one of the following is not a depository institution?

If Wolfgang transfers $1,000 out of his non- chequable deposit account and places it in his chequable deposit account,

Money market equilibrium occurs

Anything can be money as long as it

The opportunity cost of holding money increases when the

Real GDP is $2,560 billion, the GDP deflator is 125 a price level of 1.25), and the velocity of circulation is 5.The quantity of money is

International evidence shows us that

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters