Question 1

Which one of the following is presently preventing bank panics in Canada?

Accepted Answer

A) the reserve requirement 
B) the fractional reserve system 
C) the gold standard 
D) deposit insurance 
A) the reserve requirement 
B) the fractional reserve system 
C) the gold standard 
D) deposit insurance

Question 2

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

Accepted Answer

A) gold certificates. 
B) demand deposits. 
C) paper money in circulation. 
D) coins. 
A) gold certificates. 
B) demand deposits. 
C) paper money in circulation. 
D) coins.

Question 3

The amount of reserves that a chartered bank wishes to hold is equal to:

Accepted Answer

A) the amount of its demand deposits. 
B) the sum of its demand deposits and time deposits. 
C) its demand deposits multiplied by the desired reserve ratio. 
D) none of the above. 
A) the amount of its demand deposits. 
B) the sum of its demand deposits and time deposits. 
C) its demand deposits multiplied by the desired reserve ratio. 
D) none of the above.

Question 4

Chartered banks create money when they:

Accepted Answer

A) accept cash deposits from the public. 
B) purchase government securities from the central banks. 
C) create demand deposits in exchange for IOUs. 
D) raise their interest rates. 
A) accept cash deposits from the public. 
B) purchase government securities from the central banks. 
C) create demand deposits in exchange for IOUs. 
D) raise their interest rates.

Question 5

If a coin is token money, its face value is greater than its intrinsic value.

Accepted Answer

A) True 
 B)False

Question 6

A $20 bill is an example of:

Accepted Answer

A) legal tender. 
B) fiat money. 
C) a store of value. 
D) all of the above. 
A) legal tender. 
B) fiat money. 
C) a store of value. 
D) all of the above.

Question 7

Coins held in chartered banks are:

Accepted Answer

A) included in M1, but not in M2. 
B) included both in M1 and in M2. 
C) included in M2, but not in M1. 
D) not part of the nation's money supply. 
A) included in M1, but not in M2. 
B) included both in M1 and in M2. 
C) included in M2, but not in M1. 
D) not part of the nation's money supply.

Question 8

If we both have chequing accounts in the same chartered bank and I write a cheque in your name for $200, the bank's:

Accepted Answer

A) balance sheet will be unchanged. 
B) cash reserves and demand deposits will both decline by $200. 
C) liabilities will decline by $200, but its net worth will increase by $200. 
D) assets and liabilities will both decline by $200. 
A) balance sheet will be unchanged. 
B) cash reserves and demand deposits will both decline by $200. 
C) liabilities will decline by $200, but its net worth will increase by $200. 
D) assets and liabilities will both decline by $200.

Question 9

Refer to the information below, after a deposit of $10 billion of new currency into a chequing account in the banking system, the maximum amount by which the chartered banking system can expand the supply of money is: Consolidated balance sheet for the chartered banking system.Assume the desired reserve ratio is 10 percent.All figures are in billions.

Accepted Answer

A) $9 billion. 
B) $45 billion. 
C) $36 billion. 
D) $90 billion. 
A) $9 billion. 
B) $45 billion. 
C) $36 billion. 
D) $90 billion.

Question 10

When a cheque is cleared against a bank, it will lose:

Accepted Answer

A) cash and securities. 
B) demand deposits and cash reserves. 
C) reserves and stock shares. 
D) loans and demand deposits. 
A) cash and securities. 
B) demand deposits and cash reserves. 
C) reserves and stock shares. 
D) loans and demand deposits.

Question 11

Chartered banks are the major source of money creating in the Canadian economy.

Accepted Answer

A) True 
 B)False

Question 12

In 2017, the value of M2++ in Canada was about:

Accepted Answer

A) $182 billion. 
B) 5,092 billion. 
C) $2,330 billion. 
D) $3,043 billion. 
A) $182 billion. 
B) 5,092 billion. 
C) $2,330 billion. 
D) $3,043 billion.

Question 13

Which of the following statements best describes the relationship between the real value or purchasing power of the monetary unit and the price level? The purchasing power of money:

Accepted Answer

A) and the price level varies inversely. 
B) and the price level vary directly during recessions, but inversely during inflations. 
C) and the price level vary directly, but not proportionately. 
D) and the price level vary directly and proportionately. 
A) and the price level varies inversely. 
B) and the price level vary directly during recessions, but inversely during inflations. 
C) and the price level vary directly, but not proportionately. 
D) and the price level vary directly and proportionately.

Question 14

Demand deposits are:

Accepted Answer

A) included in M1. 
B) not included in either M1 or M2. 
C) considered to be a near money. 
D) also called notice deposits. 
A) included in M1. 
B) not included in either M1 or M2. 
C) considered to be a near money. 
D) also called notice deposits.

Question 15

The money supply is "backed":

Accepted Answer

A) by the government's ability to control the supply of money and therefore to keep its value relatively stable. 
B) by government bonds. 
C) dollar-for-dollar with gold and silver. 
D) dollar-for-dollar with gold bullion. 
A) by the government's ability to control the supply of money and therefore to keep its value relatively stable. 
B) by government bonds. 
C) dollar-for-dollar with gold and silver. 
D) dollar-for-dollar with gold bullion.

Question 16

What function is money serving when you buy a ticket to a movie?

Accepted Answer

A) a store of value 
B) a unit of account 
C) a transaction demand 
D) a medium of exchange 
A) a store of value 
B) a unit of account 
C) a transaction demand 
D) a medium of exchange

Question 17

Banks destroy money when they:

Accepted Answer

A) buy government bonds. 
B) accept deposits of cash. 
C) fail to reissue loans that are paid off. 
D) clear cheques against another bank. 
A) buy government bonds. 
B) accept deposits of cash. 
C) fail to reissue loans that are paid off. 
D) clear cheques against another bank.

Question 18

A chartered bank has desired reserve of $6000 and the reserve ratio is 20 percent.What are the chartered bank's demand-deposit liabilities?

Accepted Answer

A) $1,200 
B) $9,000 
C) $30,000 
D) $120,000 
A) $1,200 
B) $9,000 
C) $30,000 
D) $120,000

Question 19

Consolidated balance sheet for the chartered banking system.Assume the desired reserve ratio is 10 percent.All figures are in billions.   Refer to the above information.The chartered banking system has excess reserves of:

Accepted Answer

A) $0 billion. 
B) $30 billion. 
C) $60 billion. 
D) $70 billion. 
A) $0 billion. 
B) $30 billion. 
C) $60 billion. 
D) $70 billion.

Question 20

Refer to the information below.The monetary multiplier is: Consolidated balance sheet for the chartered banking system.All figures are in billions.Assume that the desired reserve ratio is 20 percent.

Accepted Answer

A) 4 
B) 5 
C) 8 
D) 10 
A) 4 
B) 5 
C) 8 
D) 10

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

Which one of the following is presently preventing bank panics in Canada?

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

The amount of reserves that a chartered bank wishes to hold is equal to:

Chartered banks create money when they:

If a coin is token money, its face value is greater than its intrinsic value.

A $20 bill is an example of:

Coins held in chartered banks are:

If we both have chequing accounts in the same chartered bank and I write a cheque in your name for $200, the bank's:

When a cheque is cleared against a bank, it will lose:

Chartered banks are the major source of money creating in the Canadian economy.

In 2017, the value of M2++ in Canada was about:

Which of the following statements best describes the relationship between the real value or purchasing power of the monetary unit and the price level? The purchasing power of money:

Demand deposits are:

The money supply is "backed":

What function is money serving when you buy a ticket to a movie?

Banks destroy money when they:

A chartered bank has desired reserve of $6000 and the reserve ratio is 20 percent.What are the chartered bank's demand-deposit liabilities?

Consolidated balance sheet for the chartered banking system.Assume the desired reserve ratio is 10 percent.All figures are in billions. Refer to the above information.The chartered banking system has excess reserves of:

Refer to the information below.The monetary multiplier is: Consolidated balance sheet for the chartered banking system.All figures are in billions.Assume that the desired reserve ratio is 20 percent.

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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