Question 1

One reason that "near-monies" are important is because:

Accepted Answer

A) they simplify the definition of money and therefore the formulation of monetary policy. 
B) they can be easily converted into money or vice versa, and thereby can influence the stability of the economy. 
C) they do not reflect the level of consumer spending but they have a critical impact on saving and investment in the economy. 
D) credit cards synchronize one's expenditures and income, thereby reducing the cash and chequeable deposits one must hold. 
A) they simplify the definition of money and therefore the formulation of monetary policy. 
B) they can be easily converted into money or vice versa, and thereby can influence the stability of the economy. 
C) they do not reflect the level of consumer spending but they have a critical impact on saving and investment in the economy. 
D) credit cards synchronize one's expenditures and income, thereby reducing the cash and chequeable deposits one must hold.

Question 2

If the price index rises from 100 to 130, the value of the dollar will fall by about:

Accepted Answer

A) 15 percent. 
B) 19 percent. 
C) 30 percent. 
D) 23 percent. 
A) 15 percent. 
B) 19 percent. 
C) 30 percent. 
D) 23 percent.

Question 3

The difference between M1 and M2 is that:

Accepted Answer

A) the former includes notice deposits. 
B) the latter includes personal saving deposits and non-personal notice deposits. 
C) the latter includes government bonds. 
D) the latter includes cash held by chartered banks. 
A) the former includes notice deposits. 
B) the latter includes personal saving deposits and non-personal notice deposits. 
C) the latter includes government bonds. 
D) the latter includes cash held by chartered banks.

Question 4

Suppose a chartered bank has demand deposits of $100,000 and the desired reserve ratio is 10 percent.If the bank's desired and excess reserves are equal, then its actual cash reserves:

Accepted Answer

A) are $30,000. 
B) are $10,000. 
C) are $20,000. 
D) cannot be determined from the given information. 
A) are $30,000. 
B) are $10,000. 
C) are $20,000. 
D) cannot be determined from the given information.

Question 5

The claims of the owners of a firm against the firm's assets are called:

Accepted Answer

A) working capital. 
B) assets. 
C) net worth. 
D) liabilities. 
A) working capital. 
B) assets. 
C) net worth. 
D) liabilities.

Question 6

Beside chartered banks, the Canadian banking system is supplemented by other financial intermediaries.These institutions include:

Accepted Answer

A) loan companies, trust companies, credit unions, and caisses populaires. 
B) trust companies, the Bank of Canada and small size chartered banks. 
C) trust companies, credit unions, and the Bank of Canada. 
D) loan companies, trust companies and foreign banks. 
A) loan companies, trust companies, credit unions, and caisses populaires. 
B) trust companies, the Bank of Canada and small size chartered banks. 
C) trust companies, credit unions, and the Bank of Canada. 
D) loan companies, trust companies and foreign banks.

Question 7

A chartered bank's reserves are:

Accepted Answer

A) liabilities to both the chartered bank and the Bank of Canada holding them. 
B) liabilities to the chartered bank and assets to the Bank of Canada holding them. 
C) assets to both the chartered bank and the Bank of Canada holding them. 
D) assets to the chartered bank and liabilities to the Bank of Canada holding them. 
A) liabilities to both the chartered bank and the Bank of Canada holding them. 
B) liabilities to the chartered bank and assets to the Bank of Canada holding them. 
C) assets to both the chartered bank and the Bank of Canada holding them. 
D) assets to the chartered bank and liabilities to the Bank of Canada holding them.

Question 8

Money functions as:

Accepted Answer

A) a store of value. 
B) a unit of account. 
C) a medium of exchange. 
D) all of the above. 
A) a store of value. 
B) a unit of account. 
C) a medium of exchange. 
D) all of the above.

Question 9

If actual cash reserves in the banking system are $40,000, excess reserves are $10,000, and demand deposits are $240,000, then the desired reserve ratio:

Accepted Answer

A) is 10 percent. 
B) is 12.5 percent. 
C) is 20 percent. 
D) cannot be determined from this information. 
A) is 10 percent. 
B) is 12.5 percent. 
C) is 20 percent. 
D) cannot be determined from this information.

Question 10

A bank which has assets of $85 billion and a net worth of $10 billion must have:

Accepted Answer

A) liabilities of $75 billion. 
B) excess reserves of $10 billion. 
C) liabilities of $10 billion. 
D) excess reserves of $75 billion. 
A) liabilities of $75 billion. 
B) excess reserves of $10 billion. 
C) liabilities of $10 billion. 
D) excess reserves of $75 billion.

Question 11

If the desired reserve ratio is 15 percent and chartered bankers decide to hold additional excess reserves equal to 5 percent of any newly acquired demand deposits, then the relevant money multiplier for the banking system will be:

Accepted Answer

A) 5 
B) 4 
C) 3 
D) 10 
A) 5 
B) 4 
C) 3 
D) 10

Question 12

Money and banking in Canada are federal responsibilities.

Accepted Answer

A) True 
 B)False

Question 13

The following balance sheet is for the First Edmonton Bank.Assume that the desired reserve ratio is 10%.All figures are in millions.   Refer to the above information.Suppose that customers of this bank collectively write cheques for cash at the bank in the amount of $1 million.As a result, the bank's excess reserves diminish to:

Accepted Answer

A) $0 
B) $6 million. 
C) $9 million. 
D) $9.1 million. 
A) $0 
B) $6 million. 
C) $9 million. 
D) $9.1 million.

Question 14

The following is information about a banking system: New currency deposited in the system = $40 billion; desired reserve ratio = 20%;
Excess reserves prior to the currency deposit = $0.Refer to the above information.The $40 billion deposit of currency into chequing accounts will create excess reserves of:

Accepted Answer

A) $20 billion. 
B) $32 billion. 
C) $40 billion. 
D) $0. 
A) $20 billion. 
B) $32 billion. 
C) $40 billion. 
D) $0.

Question 15

When the receipts given by goldsmiths to depositors were used to make purchases:

Accepted Answer

A) the gold standard was created. 
B) existing banking laws were violated. 
C) the receipts became in effect paper money. 
D) a fractional reserve banking system was created. 
A) the gold standard was created. 
B) existing banking laws were violated. 
C) the receipts became in effect paper money. 
D) a fractional reserve banking system was created.

Question 16

When cash is deposited in a demand-deposit account in a chartered bank:

Accepted Answer

A) the money supply increases. 
B) the money supply decreases. 
C) the composition of the money supply changes. 
D) the composition of the money supply does not change. 
A) the money supply increases. 
B) the money supply decreases. 
C) the composition of the money supply changes. 
D) the composition of the money supply does not change.

Question 17

Which of the following is the formula for a chartered bank's desired reserve ratio? is calculated by the following formula: DR - desired reserves, BD - Bank's demand, DL - deposit liabilities

Accepted Answer

A) Desired reserves/(Bank's demand - Deposit liabilities) 
B) Desired reserves/(Bank's demand + Deposit liabilities) 
C) Bank's demand/(Desired reserves + Deposit liabilities) 
D) Deposit liabilities/(Bank's demand + Desired reserves) 
A) Desired reserves/(Bank's demand - Deposit liabilities) 
B) Desired reserves/(Bank's demand + Deposit liabilities) 
C) Bank's demand/(Desired reserves + Deposit liabilities) 
D) Deposit liabilities/(Bank's demand + Desired reserves)

Question 18

The following is information about a banking system: New currency deposited in the system = $40 billion; desired reserve ratio = 20%;
Excess reserves prior to the currency deposit = $0.Refer to the above information.The $40 billion deposit of currency into chequing accounts will initially create:

Accepted Answer

A) $8 billion of new demand deposits. 
B) $10 billion of new demand deposits. 
C) $40 billion of new demand deposits. 
D) $160 billion of new demand deposits. 
A) $8 billion of new demand deposits. 
B) $10 billion of new demand deposits. 
C) $40 billion of new demand deposits. 
D) $160 billion of new demand deposits.

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.If there is a deposit of $10 billion of new currency into chequing accounts in the banking system, excess reserves will increase by:

Accepted Answer

A) $1 billion. 
B) $2 billion. 
C) $8 billion. 
D) $10 billion. 
A) $1 billion. 
B) $2 billion. 
C) $8 billion. 
D) $10 billion.

Question 20

Near money means:

Accepted Answer

A) Money substitutes such as credit cards 
B) Chequing accounts 
C) They are not backed by gold 
D) They do not function as a medium of exchange but they serve as a store of value 
A) Money substitutes such as credit cards 
B) Chequing accounts 
C) They are not backed by gold 
D) They do not function as a medium of exchange but they serve as a store of value

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

One reason that "near-monies" are important is because:

If the price index rises from 100 to 130, the value of the dollar will fall by about:

The difference between M1 and M2 is that:

Suppose a chartered bank has demand deposits of $100,000 and the desired reserve ratio is 10 percent.If the bank's desired and excess reserves are equal, then its actual cash reserves:

The claims of the owners of a firm against the firm's assets are called:

Beside chartered banks, the Canadian banking system is supplemented by other financial intermediaries.These institutions include:

A chartered bank's reserves are:

Money functions as:

If actual cash reserves in the banking system are $40,000, excess reserves are $10,000, and demand deposits are $240,000, then the desired reserve ratio:

A bank which has assets of $85 billion and a net worth of $10 billion must have:

If the desired reserve ratio is 15 percent and chartered bankers decide to hold additional excess reserves equal to 5 percent of any newly acquired demand deposits, then the relevant money multiplier for the banking system will be:

Money and banking in Canada are federal responsibilities.

When the receipts given by goldsmiths to depositors were used to make purchases:

When cash is deposited in a demand-deposit account in a chartered bank:

Which of the following is the formula for a chartered bank's desired reserve ratio? is calculated by the following formula: DR - desired reserves, BD - Bank's demand, DL - deposit liabilities

The following is information about a banking system: New currency deposited in the system = $40 billion; desired reserve ratio = 20%; Excess reserves prior to the currency deposit = $0.Refer to the above information.The $40 billion deposit of currency into chequing accounts will initially create:

Near money means:

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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