Question 1

When a bank has a cheque drawn and cleared against it:

Accepted Answer

A) excess reserves in the banking system decline. 
B) the nation's total money supply falls. 
C) the bank's balance sheet does not change. 
D) the amount of desired reserves the bank has will fall. 
A) excess reserves in the banking system decline. 
B) the nation's total money supply falls. 
C) the bank's balance sheet does not change. 
D) the amount of desired reserves the bank has will fall.

Question 2

If actual reserves in the banking system are $50,000, excess reserves are $5,000, and demand deposits are $225,000, then the money multiplier:

Accepted Answer

A) is 10. 
B) is 5. 
C) is 4. 
D) cannot be determined from this information. 
A) is 10. 
B) is 5. 
C) is 4. 
D) cannot be determined from this information.

Question 3

If we assume m to be equal to the maximum amount of dollar that can be created from a single dollar of excess reserves and R to be equal to the desired reserve ratio, then we can say that for the banking system:

Accepted Answer

A) m = R - 1. 
B) R = m/1. 
C) R = m - 1. 
D) m = 1/R. 
A) m = R - 1. 
B) R = m/1. 
C) R = m - 1. 
D) m = 1/R.

Question 4

Chartered banks monetize claims when they sell securities to the Bank of Canada.

Accepted Answer

A) True 
 B)False

Question 5

Refer to the above information.The value of the dollar in year 4 is:

Accepted Answer

A) $.25. 
B) $.33. 
C) $.50. 
D) $2.00. 
A) $.25. 
B) $.33. 
C) $.50. 
D) $2.00.

Question 6

A chartered bank that is temporarily short in the level of reserves it wishes to hold will borrow from another chartered bank:

Accepted Answer

A) overnight. 
B) over a week. 
C) for a month. 
D) for six months. 
A) overnight. 
B) over a week. 
C) for a month. 
D) for six months.

Question 7

The multiple by which the chartered banking system can increase the supply of money on the basis of each dollar of excess reserves is equal to:

Accepted Answer

A) the reciprocal of the desired reserve ratio. 
B) 1 minus the desired reserve ratio. 
C) the reciprocal of the income velocity of money. 
D) 1/MPS. 
A) the reciprocal of the desired reserve ratio. 
B) 1 minus the desired reserve ratio. 
C) the reciprocal of the income velocity of money. 
D) 1/MPS.

Question 8

1.Foreign currency deposits of residents booked in Canada 2.Personal savings deposits at the chartered banks
3)Currency (coins and paper money)
4)Demand deposits
5)Government securities
6)Non-personal notice deposits at the chartered banks
Refer to the above information.Which of the following is not included in any of the official definitions of money?

Accepted Answer

A) item 1 
B) items 1 and 4 
C) no item 
D) item 5 
A) item 1 
B) items 1 and 4 
C) no item 
D) item 5

Question 9

The M2+ definition of the money supply includes:

Accepted Answer

A) M1 plus the M2. 
B) M2 plus the coins and paper money held by the chartered banks. 
C) M2 plus the deposits at trust and mortgage companies, credit unions, caisses populaires, and government savings institutions, plus money market mutual funds and life insurance annuities. 
D) M2 plus the government securities held by the chartered banks. 
A) M1 plus the M2. 
B) M2 plus the coins and paper money held by the chartered banks. 
C) M2 plus the deposits at trust and mortgage companies, credit unions, caisses populaires, and government savings institutions, plus money market mutual funds and life insurance annuities. 
D) M2 plus the government securities held by the chartered banks.

Question 10

The following balance sheet is for the First National Bank.Assume the reserve ratio is 15 percent.   Refer to the above data.This bank can make new loans of up to:

Accepted Answer

A) $50,000 
B) $41,000 
C) $27,000 
D) $32,000 
A) $50,000 
B) $41,000 
C) $27,000 
D) $32,000

Question 11

The basic source of money in our economy is the Department of Finance.

Accepted Answer

A) True 
 B)False

Question 12

Money eliminates the need for a coincidence of wants primarily through its use as a:

Accepted Answer

A) unit of account. 
B) medium of exchange 
C) store of value. 
D) standard of confidence. 
A) unit of account. 
B) medium of exchange 
C) store of value. 
D) standard of confidence.

Question 13

The balance sheet below is for chartered bank ABC.Assume the desired reserve ratio is 20 percent.All figures are in billions.   Refer to the above information.The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

Accepted Answer

A) $5,000 and $110,000. 
B) $5,000 and $25,000. 
C) $5,000 and, 22,000. 
D) $5,000 and, 27,000. 
A) $5,000 and $110,000. 
B) $5,000 and $25,000. 
C) $5,000 and, 22,000. 
D) $5,000 and, 27,000.

Question 14

The smallest component of the money supply (M1) is:

Accepted Answer

A) currency. 
B) chequable deposits. 
C) small time deposits. 
D) large time deposits. 
A) currency. 
B) chequable deposits. 
C) small time deposits. 
D) large time deposits.

Question 15

Stock market price quotations best exemplify money serving as a:

Accepted Answer

A) store of value. 
B) unit of account. 
C) medium of exchange. 
D) index of satisfaction. 
A) store of value. 
B) unit of account. 
C) medium of exchange. 
D) index of satisfaction.

Question 16

The primary purpose of the desired reserve is to provide the means by which the monetary authorities can influence the lending ability of chartered banks.

Accepted Answer

A) True 
 B)False

Question 17

A $200 price tag on a cashmere sweater in a department store window is an example of money functioning as a:

Accepted Answer

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

Question 18

The balance sheet below is for chartered bank EFG.Assume the desired reserve ratio is 25 percent.All figures are in billions.   Refer to the above information.The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

Accepted Answer

A) $140 and, $560. 
B) $51 and, $204. 
C) $16 and, $376. 
D) $16 and, $64. 
A) $140 and, $560. 
B) $51 and, $204. 
C) $16 and, $376. 
D) $16 and, $64.

Question 19

The following is a consolidated balance sheet for the chartered banking system.All figures are in billions.Assume that the desired reserve ratio is 20 percent.   Refer to the above information.The maximum amount by which this chartered banking system can expand the supply of money by lending is:

Accepted Answer

A) $120 billion. 
B) $300 billion. 
C) $480 billion. 
D) $600 billion. 
A) $120 billion. 
B) $300 billion. 
C) $480 billion. 
D) $600 billion.

Question 20

Currency and coins held by banks are part of the M1 definition of money supply.

Accepted Answer

A) True 
 B)False

Exam 14: B: Money, Banking, and Money Creation

When a bank has a cheque drawn and cleared against it:

If actual reserves in the banking system are $50,000, excess reserves are $5,000, and demand deposits are $225,000, then the money multiplier:

If we assume m to be equal to the maximum amount of dollar that can be created from a single dollar of excess reserves and R to be equal to the desired reserve ratio, then we can say that for the banking system:

Chartered banks monetize claims when they sell securities to the Bank of Canada.

Refer to the above information.The value of the dollar in year 4 is:

A chartered bank that is temporarily short in the level of reserves it wishes to hold will borrow from another chartered bank:

The multiple by which the chartered banking system can increase the supply of money on the basis of each dollar of excess reserves is equal to:

The M2+ definition of the money supply includes:

The following balance sheet is for the First National Bank.Assume the reserve ratio is 15 percent. Refer to the above data.This bank can make new loans of up to:

The basic source of money in our economy is the Department of Finance.

Money eliminates the need for a coincidence of wants primarily through its use as a:

The balance sheet below is for chartered bank ABC.Assume the desired reserve ratio is 20 percent.All figures are in billions. Refer to the above information.The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

The smallest component of the money supply (M1) is:

Stock market price quotations best exemplify money serving as a:

The primary purpose of the desired reserve is to provide the means by which the monetary authorities can influence the lending ability of chartered banks.

A $200 price tag on a cashmere sweater in a department store window is an example of money functioning as a:

The balance sheet below is for chartered bank EFG.Assume the desired reserve ratio is 25 percent.All figures are in billions. Refer to the above information.The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

The following is a consolidated balance sheet for the chartered banking system.All figures are in billions.Assume that the desired reserve ratio is 20 percent. Refer to the above information.The maximum amount by which this chartered banking system can expand the supply of money by lending is:

Currency and coins held by banks are part of the M1 definition of money supply.

B: Limits, Alternatives, and Choices

A: - Limits, Alternatives, and Choices

B: The Market System and the Circular Flow

A: - The Market System and the Circular Flow

B: Demand, Supply, and Market Equilibrium

A: - Demand, Supply, and Market Equilibrium

B: Market Failures: Public Goods and Externalities

A: - Market Failures: Public Goods and Externalities

B: Governments Role and Government Failure

A: Governments Role and Government Failure

B: an Introduction to Macroeconomics

A: an Introduction to Macroeconomics

B: Measuring the Economys Output

A: Measuring the Economys Output

B: Economic Growth

A: Economic Growth

B: Business Cycles, Unemployment, and Inflation

A: Business Cycles, Unemployment, and Inflation

B: Basic Macroeconomic Relationships

A: Basic Macroeconomic Relationships

B: The Aggregate Expenditures Model

A: The Aggregate Expenditures Model

B: Aggregate Demand and Aggregate Supply

A: Aggregate Demand and Aggregate Supply

B: Fiscal Policy, Deficits, Surpluses, and Debt

A: Fiscal Policy, Deficits, Surpluses, and Debt

A: Money, Banking, and Money Creation

B: Interest Rates and Monetary Policy

A: Interest Rates and Monetary Policy

C: Financial Economics

A: Long-Run Macroeconomic Adjustments

B: Long-Run Macroeconomic Adjustments

A: International Trade

B: International Trade

A: The Balance of Payments and Exchange Rates

B: The Balance of Payments and Exchange Rates

The Economics of Developing Countries

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