Question 1

The quantity of money that the banking system can create is limited by

Accepted Answer

A) bank managers' decisions. 
B) the monetary base, desired reserves, and desired currency holdings. 
C) the number of consumers who apply for loans. 
D) the credit ratings of the consumers who are applying for loans. 
E) the quantity of bank notes released by the Bank of Canada. 
A) bank managers' decisions. 
B) the monetary base, desired reserves, and desired currency holdings. 
C) the number of consumers who apply for loans. 
D) the credit ratings of the consumers who are applying for loans. 
E) the quantity of bank notes released by the Bank of Canada. B

Question 2

Use the information below to answer the following questions.
Fact 24.3.1
The Bank of Speedy Creek has chosen the following initial balance sheet:
  
-Refer to Fact 24.3.1.Based on the Bank of Speedy Creek's initial balance sheet,what is its desired reserve ratio?

Accepted Answer

A) 4 percent 
B) 8 percent 
C) 12.5 percent 
D) 25 percent 
E) 40 percent 
A) 4 percent 
B) 8 percent 
C) 12.5 percent 
D) 25 percent 
E) 40 percent B

Question 3

Which of the following is an economic function of a chartered bank?

Accepted Answer

A) Issuing bank notes. 
B) Pooling risk. 
C) Supervising financial markets. 
D) Conducting monetary policy. 
E) None of the above. 
A) Issuing bank notes. 
B) Pooling risk. 
C) Supervising financial markets. 
D) Conducting monetary policy. 
E) None of the above. B

Question 4

Use the figure below to answer the following questions.
   
Figure 24.4.2
-Refer to Figure 24.4.2.Which one of the following best describes the response to a decrease in the market price of bonds?

Accepted Answer

A) A movement from A to B 
B) A movement from A to C 
C) A movement from A to F 
D) A movement from A to E 
E) A movement from E to A 
A) A movement from A to B 
B) A movement from A to C 
C) A movement from A to F 
D) A movement from A to E 
E) A movement from E to A

Question 5

Which one of the following is not money?

Accepted Answer

A) a chequable deposit 
B) Canadian currency 
C) a credit card 
D) a non-chequable deposit 
E) a fixed term deposit 
A) a chequable deposit 
B) Canadian currency 
C) a credit card 
D) a non-chequable deposit 
E) a fixed term deposit

Question 6

Use the information below to answer the following question.
Fact 24.1.1
The information describes a hypothetical banking system.Assume that all banks are holding their desired reserves.
  
-Refer to Fact 24.1.1.The quantity of money as measured by M1 is equal to

Accepted Answer

A) $2,500. 
B) $1,500. 
C) $6,500. 
D) $7,000. 
E) $6,000. 
A) $2,500. 
B) $1,500. 
C) $6,500. 
D) $7,000. 
E) $6,000.

Question 7

Use the table below to answer the following questions.
Table 24.4.1
  
-Refer to Table 24.4.1.The spreadsheet provides information about the demand for money in Minland.
Column A is the nominal interest rate,r.Columns B and C show the quantity of money demanded at two different levels of real GDP: Y? is $10 billion and Y? is $20 billion.
The quantity of money is $3 billion.Real GDP is $20 billion.
If the interest rate is less than 4 percent a year

Accepted Answer

A) people sell bonds, the price of a bond falls, and the interest rate rises. 
B) people buy bonds, the price of a bond rises, and the interest rate rises. 
C) people sell bonds, the price of a bond falls, and the interest rate falls. 
D) people buy bonds, the price of a bond rises, and the interest rate falls. 
E) the demand for money increases. 
A) people sell bonds, the price of a bond falls, and the interest rate rises. 
B) people buy bonds, the price of a bond rises, and the interest rate rises. 
C) people sell bonds, the price of a bond falls, and the interest rate falls. 
D) people buy bonds, the price of a bond rises, and the interest rate falls. 
E) the demand for money increases.

Question 8

Use the figure below to answer the following questions.
   
Figure 24.4.2
-Refer to Figure 24.4.2.Which one of the following best describes the response to an increase in real GDP?

Accepted Answer

A) Movement from A to F 
B) Movement from A to C 
C) Movement from E to A 
D) Movement from B to A 
E) Movement from A to E 
A) Movement from A to F 
B) Movement from A to C 
C) Movement from E to A 
D) Movement from B to A 
E) Movement from A to E

Question 9

The official definitions of money can include all of the following except

Accepted Answer

A) currency outside banks. 
B) personal chequable deposits. 
C) non-chequable deposits. 
D) deposits at trust and mortgage loan companies. 
E) cheques. 
A) currency outside banks. 
B) personal chequable deposits. 
C) non-chequable deposits. 
D) deposits at trust and mortgage loan companies. 
E) cheques.

Question 10

Which one of the following would not be considered a depository institution?

Accepted Answer

A) The Bank of Canada. 
B) a credit union 
C) a caisse populaire 
D) a trust and mortgage loan company 
E) The Bank of Montreal 
A) The Bank of Canada. 
B) a credit union 
C) a caisse populaire 
D) a trust and mortgage loan company 
E) The Bank of Montreal

Question 11

Use the figure below to answer the following questions.
   
Figure 24.4.2
-Refer to Figure 24.4.2.Which one of the following best describes the response to a rise in the market price of bonds?

Accepted Answer

A) A movement from A to B 
B) A movement from A to C 
C) A movement from A to F 
D) A movement from A to E 
E) A movement from C to A 
A) A movement from A to B 
B) A movement from A to C 
C) A movement from A to F 
D) A movement from A to E 
E) A movement from C to A

Question 12

Money's function as a unit of account can best be described as

Accepted Answer

A) an agreed measure for stating the prices of goods and services. 
B) an entry in an accounting ledger. 
C) a method of recording transactions. 
D) a commodity that can be exchanged for another commodity. 
E) a generally accepted medium of exchange. 
A) an agreed measure for stating the prices of goods and services. 
B) an entry in an accounting ledger. 
C) a method of recording transactions. 
D) a commodity that can be exchanged for another commodity. 
E) a generally accepted medium of exchange.

Question 13

Which of the following is an asset of the Bank of Canada?

Accepted Answer

A) loans to depository institutions 
B) Bank of Canada notes 
C) depository institution deposits 
D) deposits of private Canadian citizens 
E) loans to private Canadian citizens 
A) loans to depository institutions 
B) Bank of Canada notes 
C) depository institution deposits 
D) deposits of private Canadian citizens 
E) loans to private Canadian citizens

Question 14

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

Accepted Answer

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

Question 15

Nominal money is equal to real

Accepted Answer

A) money times the price level. 
B) GDP times the price level. 
C) GDP times the GDP deflator. 
D) money divided by the price level. 
E) GDP times real money. 
A) money times the price level. 
B) GDP times the price level. 
C) GDP times the GDP deflator. 
D) money divided by the price level. 
E) GDP times real money.

Question 16

The Bank of Canada is the lender of last resort.This means banks may borrow money from the Bank of Canada

Accepted Answer

A) whenever they are short of reserves. 
B) overnight. 
C) if they have sufficient securities to support the loan. 
D) if the banking system as a whole is short of reserves. 
E) to finance a sudden and dramatic increase in overseas reserves. 
A) whenever they are short of reserves. 
B) overnight. 
C) if they have sufficient securities to support the loan. 
D) if the banking system as a whole is short of reserves. 
E) to finance a sudden and dramatic increase in overseas reserves.

Question 17

The higher and more unpredictable the changes in the monetary unit,the

Accepted Answer

A) lower the opportunity cost of using it as a medium of exchange. 
B) lower the opportunity cost of using it as a store of value. 
C) higher the opportunity cost of using it as a store of value. 
D) less likely barter exchange will replace it. 
E) lower the opportunity cost of using it as a standard of deferred payment. 
A) lower the opportunity cost of using it as a medium of exchange. 
B) lower the opportunity cost of using it as a store of value. 
C) higher the opportunity cost of using it as a store of value. 
D) less likely barter exchange will replace it. 
E) lower the opportunity cost of using it as a standard of deferred payment.

Question 18

Which of the following is a function of money?

Accepted Answer

A) A medium of exchange. 
B) A measure of liquidity. 
C) A means of pooling risk. 
D) A store of exchange. 
E) A means of reducing transactions costs. 
A) A medium of exchange. 
B) A measure of liquidity. 
C) A means of pooling risk. 
D) A store of exchange. 
E) A means of reducing transactions costs.

Question 19

Use the figure below to answer the following questions.
   
Figure 24.4.2
-Refer to Figure 24.4.2.Which one of the following best describes the response to a decrease in real GDP?

Accepted Answer

A) A movement from A to C 
B) A movement from A to B 
C) A movement from A to E 
D) A movement from B to C 
E) A movement from E to A 
A) A movement from A to C 
B) A movement from A to B 
C) A movement from A to E 
D) A movement from B to C 
E) A movement from E to A

Question 20

GDP is $2,000 billion,the price level is 100,and the velocity of circulation is 5.The quantity of money is

Accepted Answer

A) $10,000 billion. 
B) $2,000 billion. 
C) $400 billion. 
D) $20 billion. 
E) $500 billion. 
A) $10,000 billion. 
B) $2,000 billion. 
C) $400 billion. 
D) $20 billion. 
E) $500 billion.

Exam 24: Money, the Price Level, and Inflation

The quantity of money that the banking system can create is limited by

Use the information below to answer the following questions. Fact 24.3.1 The Bank of Speedy Creek has chosen the following initial balance sheet: -Refer to Fact 24.3.1.Based on the Bank of Speedy Creek's initial balance sheet,what is its desired reserve ratio?

Which of the following is an economic function of a chartered bank?

Use the figure below to answer the following questions. Figure 24.4.2 -Refer to Figure 24.4.2.Which one of the following best describes the response to a decrease in the market price of bonds?

Which one of the following is not money?

Use the information below to answer the following question. Fact 24.1.1 The information describes a hypothetical banking system.Assume that all banks are holding their desired reserves. -Refer to Fact 24.1.1.The quantity of money as measured by M1 is equal to

Use the figure below to answer the following questions. Figure 24.4.2 -Refer to Figure 24.4.2.Which one of the following best describes the response to an increase in real GDP?

The official definitions of money can include all of the following except

Which one of the following would not be considered a depository institution?

Use the figure below to answer the following questions. Figure 24.4.2 -Refer to Figure 24.4.2.Which one of the following best describes the response to a rise in the market price of bonds?

Money's function as a unit of account can best be described as

Which of the following is an asset of the Bank of Canada?

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

Nominal money is equal to real

The Bank of Canada is the lender of last resort.This means banks may borrow money from the Bank of Canada

The higher and more unpredictable the changes in the monetary unit,the

Which of the following is a function of money?

Use the figure below to answer the following questions. Figure 24.4.2 -Refer to Figure 24.4.2.Which one of the following best describes the response to a decrease in real GDP?

GDP is $2,000 billion,the price level is 100,and the velocity of circulation is 5.The quantity of money is

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