Question 1

Neutrality of money refers to

Accepted Answer

A) a one-time change in the money supply has a one-time change in economic activity. 
B) a one-time change in the money supply has no real consequence for the economy. 
C) a one-time change in the money supply affects consumption and investment decisions only. 
D) money being a medium of exchange for everyone. 
E) a certain percentage change in the money supply has the same percentage change in economic activity. 
A) a one-time change in the money supply has a one-time change in economic activity. 
B) a one-time change in the money supply has no real consequence for the economy. 
C) a one-time change in the money supply affects consumption and investment decisions only. 
D) money being a medium of exchange for everyone. 
E) a certain percentage change in the money supply has the same percentage change in economic activity.

Question 2

In a corridor system

Accepted Answer

A) reserves must be sufficiently large. 
B) interest rates are determined by fiscal policy. 
C) the Bank rate determines the overnight interest rate. 
D) the central bank must intervene each day to peg the overnight interest rate. 
E) the interest rate on deposits at the central bank determines the overnight interest rate. 
A) reserves must be sufficiently large. 
B) interest rates are determined by fiscal policy. 
C) the Bank rate determines the overnight interest rate. 
D) the central bank must intervene each day to peg the overnight interest rate. 
E) the interest rate on deposits at the central bank determines the overnight interest rate.

Question 3

To increase the nominal money supply, the government can

Accepted Answer

A) temporarily increase government spending, with an increase in either taxes or the quantity of government bonds. 
B) engage in open market sales of interest-bearing debt. 
C) reduce the quantity of government bonds, with an increase in government spending or taxes. 
D) increase government spending and taxes by the same amount. 
E) drop money out of helicopters. 
A) temporarily increase government spending, with an increase in either taxes or the quantity of government bonds. 
B) engage in open market sales of interest-bearing debt. 
C) reduce the quantity of government bonds, with an increase in government spending or taxes. 
D) increase government spending and taxes by the same amount. 
E) drop money out of helicopters.

Question 4

In a floor system

Accepted Answer

A) the central bank's deposit rate determines the overnight interest rate. 
B) interest rates are highly variable. 
C) the central bank must intervene each day to achieve its interest rate target. 
D) the central bank's lending rate determines the overnight interest rate. 
E) reserves are essentially zero. 
A) the central bank's deposit rate determines the overnight interest rate. 
B) interest rates are highly variable. 
C) the central bank must intervene each day to achieve its interest rate target. 
D) the central bank's lending rate determines the overnight interest rate. 
E) reserves are essentially zero.

Question 5

The monetary intertemporal model assumes that

Accepted Answer

A) after leaving the credit market, consumers do not go to work. 
B) the real interest rate equals the nominal interest rate. 
C) all credit card balances are paid off at the end of the day. 
D) the federal government makes all the decisions about interest rates. 
E) all transactions in the credit market are carried out using credit cards. 
A) after leaving the credit market, consumers do not go to work. 
B) the real interest rate equals the nominal interest rate. 
C) all credit card balances are paid off at the end of the day. 
D) the federal government makes all the decisions about interest rates. 
E) all transactions in the credit market are carried out using credit cards.

Question 6

A liquidity trap occurs when

Accepted Answer

A) the central bank does not print enough currency. 
B) consumers are too reliant on credit cards for purchases. 
C) the real interest rate is zero. 
D) the real interest rate is very high. 
E) too many arbitrage opportunities exist. 
A) the central bank does not print enough currency. 
B) consumers are too reliant on credit cards for purchases. 
C) the real interest rate is zero. 
D) the real interest rate is very high. 
E) too many arbitrage opportunities exist.

Question 7

Nominal bonds can be issued by

Accepted Answer

A) chartered banks. 
B) government, consumers, or business firms. 
C) business firms. 
D) government and consumers. 
E) the Bank of Canada. 
A) chartered banks. 
B) government, consumers, or business firms. 
C) business firms. 
D) government and consumers. 
E) the Bank of Canada.

Question 8

An open-market operation refers to

Accepted Answer

A) changing the money supply by changing government spending. 
B) an exchange of domestic money for foreign money by the monetary authority. 
C) an exchange of money for interest-bearing debt by the monetary authority. 
D) changing the money supply by changing taxes. 
E) seigniorage. 
A) changing the money supply by changing government spending. 
B) an exchange of domestic money for foreign money by the monetary authority. 
C) an exchange of money for interest-bearing debt by the monetary authority. 
D) changing the money supply by changing taxes. 
E) seigniorage.

Question 9

Money is useful in exchange when

Accepted Answer

A) credit transactions are difficult. 
B) interest rates are high. 
C) there is a single coincidence of wants. 
D) there are several monetary aggregates. 
E) inflation is rising. 
A) credit transactions are difficult. 
B) interest rates are high. 
C) there is a single coincidence of wants. 
D) there are several monetary aggregates. 
E) inflation is rising.

Question 10

The quantity of money in circulation is governed by

Accepted Answer

A) individual consumers. 
B) the central bank. 
C) provincial governments. 
D) chartered banks. 
E) the federal government. 
A) individual consumers. 
B) the central bank. 
C) provincial governments. 
D) chartered banks. 
E) the federal government.

Question 11

Debit cards and online banking has

Accepted Answer

A) increased the riskiness of banks. 
B) decreased the riskiness of banks. 
C) increased the cost of banking transactions and reduced the demand for money. 
D) lowered the cost of banking transactions and reduced the demand for money. 
E) lowered the cost of banking transactions and increased the demand for money. 
A) increased the riskiness of banks. 
B) decreased the riskiness of banks. 
C) increased the cost of banking transactions and reduced the demand for money. 
D) lowered the cost of banking transactions and reduced the demand for money. 
E) lowered the cost of banking transactions and increased the demand for money.

Question 12

The most distinguishing economic feature of money is its

Accepted Answer

A) store of value role. 
B) medium of exchange role. 
C) unit of account role. 
D) standard of deferred payment role. 
E) store of wealth role. 
A) store of value role. 
B) medium of exchange role. 
C) unit of account role. 
D) standard of deferred payment role. 
E) store of wealth role.

Question 13

Equilibrium in the credit card market

Accepted Answer

A) results in a larger volume of real transactions. 
B) determines the demand for money. 
C) occurs if the marginal benefit exceeds the marginal cost of credit card balances. 
D) raises the real interest rate. 
E) is equal to nominal income earned during the day. 
A) results in a larger volume of real transactions. 
B) determines the demand for money. 
C) occurs if the marginal benefit exceeds the marginal cost of credit card balances. 
D) raises the real interest rate. 
E) is equal to nominal income earned during the day.

Question 14

The most narrowly defined monetary aggregate is

Accepted Answer

A) M2++. 
B) M2. 
C) currency outside banks. 
D) L. 
E) M1. 
A) M2++. 
B) M2. 
C) currency outside banks. 
D) L. 
E) M1.

Question 15

If R > q, then

Accepted Answer

A) the marginal benefit of using cash exceeds the marginal cost. 
B) the nominal interest rate is not in equilibrium. 
C) the real interest rate does not reach its equilibrium value. 
D) the marginal cost of using the credit card exceeds the marginal benefit. 
E) the marginal benefit of using the credit card exceeds the marginal cost. 
A) the marginal benefit of using cash exceeds the marginal cost. 
B) the nominal interest rate is not in equilibrium. 
C) the real interest rate does not reach its equilibrium value. 
D) the marginal cost of using the credit card exceeds the marginal benefit. 
E) the marginal benefit of using the credit card exceeds the marginal cost.

Question 16

Barter, the exchange of goods for goods, relates to

Accepted Answer

A) a single coincidence of wants. 
B) a double coincidence of wants. 
C) the role of money as a medium of exchange. 
D) the role of the monetary base. 
E) money as a store of value. 
A) a single coincidence of wants. 
B) a double coincidence of wants. 
C) the role of money as a medium of exchange. 
D) the role of the monetary base. 
E) money as a store of value.

Question 17

The real return on bonds is

Accepted Answer

A) the return someone receives from holding a real bond from the current to the future period. 
B) the return someone receives from holding a nominal bond from the current to the future period. 
C) always greater than the nominal return. 
D) always equal to the nominal return. 
E) R. 
A) the return someone receives from holding a real bond from the current to the future period. 
B) the return someone receives from holding a nominal bond from the current to the future period. 
C) always greater than the nominal return. 
D) always equal to the nominal return. 
E) R.

Question 18

The nominal interest rate cannot fall below zero because

Accepted Answer

A) inflation is generally too low. 
B) financial markets do allow for arbitrage opportunities. 
C) inflation is generally too high. 
D) central banks are engaged in interest rate targeting. 
E) financial markets cannot allow for arbitrage opportunities. 
A) inflation is generally too low. 
B) financial markets do allow for arbitrage opportunities. 
C) inflation is generally too high. 
D) central banks are engaged in interest rate targeting. 
E) financial markets cannot allow for arbitrage opportunities.

Question 19

Which one of the following is included in M3, but not in M2?

Accepted Answer

A) Canadian currency held by foreigners 
B) personal term deposits 
C) Bank of Canada term deposits 
D) foreign currency deposits of residents of Canada 
E) Eurodollars 
A) Canadian currency held by foreigners 
B) personal term deposits 
C) Bank of Canada term deposits 
D) foreign currency deposits of residents of Canada 
E) Eurodollars

Question 20

Real money demand is a function of

Accepted Answer

A) increasing real income and decreasing nominal interest rates. 
B) increasing real income and increasing inflation rates. 
C) increasing real income and decreasing inflation rates. 
D) the level of transactions in the economy. 
E) increasing real income. 
A) increasing real income and decreasing nominal interest rates. 
B) increasing real income and increasing inflation rates. 
C) increasing real income and decreasing inflation rates. 
D) the level of transactions in the economy. 
E) increasing real income.

Neutrality of money refers to

In a corridor system

To increase the nominal money supply, the government can

In a floor system

The monetary intertemporal model assumes that

A liquidity trap occurs when

Nominal bonds can be issued by

An open-market operation refers to

Money is useful in exchange when

The quantity of money in circulation is governed by

Debit cards and online banking has

The most distinguishing economic feature of money is its

Equilibrium in the credit card market

The most narrowly defined monetary aggregate is

If R > q, then

Barter, the exchange of goods for goods, relates to

The real return on bonds is

The nominal interest rate cannot fall below zero because

Which one of the following is included in M3, but not in M2?

Real money demand is a function of

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: the Workleisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: the Consumptionsavings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model With Investment

Business Cycle Models With Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: a Deeper Look

Filters

Exam 12: Money, Banking, Prices, and Monetary Policy

Neutrality of money refers to

In a corridor system

To increase the nominal money supply, the government can

In a floor system

The monetary intertemporal model assumes that

A liquidity trap occurs when

Nominal bonds can be issued by

An open-market operation refers to

Money is useful in exchange when

The quantity of money in circulation is governed by

Debit cards and online banking has

The most distinguishing economic feature of money is its

Equilibrium in the credit card market

The most narrowly defined monetary aggregate is

If R > q, then

Barter, the exchange of goods for goods, relates to

The real return on bonds is

The nominal interest rate cannot fall below zero because

Which one of the following is included in M3, but not in M2?

Real money demand is a function of

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: the Workleisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: the Consumptionsavings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model With Investment

Business Cycle Models With Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: a Deeper Look

Filters