Question 1

In the model of the money supply process,the Bank of Canada's role in influencing the money supply is represented by ________.

Accepted Answer

A)  both desired reserves and currency holdings 
B)  nonborrowed reserves and borrowed reserves 
C)  only borrowed reserves 
D)  only nonborrowed reserves 
A)  both desired reserves and currency holdings 
B)  nonborrowed reserves and borrowed reserves 
C)  only borrowed reserves 
D)  only nonborrowed reserves

Question 2

The government agency that oversees the banking system and is responsible for the conduct of monetary policy in Canada is ________.

Accepted Answer

A)  the Bank of Canada 
B)  the Department of Finance 
C)  the Canada Customs and Revenue Agency 
D)  the House of Parliament 
A)  the Bank of Canada 
B)  the Department of Finance 
C)  the Canada Customs and Revenue Agency 
D)  the House of Parliament

Question 3

If reserves in the banking system increase by $100,then chequable deposits will increase by $1000 in the simple model of deposit creation when the desired reserve ratio is ________.

Accepted Answer

A)  0.01 
B)  0.10 
C)  0.05 
D)  0.20 
A)  0.01 
B)  0.10 
C)  0.05 
D)  0.20

Question 4

If the desired reserve ratio is 20 percent,the simple deposit multiplier is ________.

Accepted Answer

A)  5.0 
B)  2.5 
C)  4.0 
D)  10.0 
A)  5.0 
B)  2.5 
C)  4.0 
D)  10.0

Question 5

If a bank has excess reserves of $4,000 and demand deposit liabilities of $100,000,and if the reserve requirement is 15 percent,then the bank has actual reserves of ________.

Accepted Answer

A)  $17,000 
B)  $19,000 
C)  $24,000 
D)  $29,000 
A)  $17,000 
B)  $19,000 
C)  $24,000 
D)  $29,000

Question 6

Recognizing the distinction between advances to banks and the nonborrowed monetary base,the money supply model is specified as ________.

Accepted Answer

A)  M = m × (MBn - BR) 
B)  M = m × (MBn + BR) 
C)  M = m + (MBn - BR) 
D)  M = m - (MBn + BR) 
A)  M = m × (MBn - BR) 
B)  M = m × (MBn + BR) 
C)  M = m + (MBn - BR) 
D)  M = m - (MBn + BR)

Question 7

If the desired reserve ratio is 15 percent,the simple deposit multiplier is ________.

Accepted Answer

A)  15.0 
B)  1.5 
C)  6.67 
D)  3.33 
A)  15.0 
B)  1.5 
C)  6.67 
D)  3.33

Question 8

If the desired reserve ratio is one-third,currency in circulation is $300 billion,and chequable deposits are $900 billion,then the money supply is ________.

Accepted Answer

A)  $2700 
B)  $3000 
C)  $1200 
D)  $1800 
A)  $2700 
B)  $3000 
C)  $1200 
D)  $1800

Question 9

In the simple deposit expansion model,if the desired reserve ratio is 20 percent and the Bank of Canada increases reserves by $100,chequable deposits can potentially expand by ________.

Accepted Answer

A)  $100 
B)  $250 
C)  $500 
D)  $1,000 
A)  $100 
B)  $250 
C)  $500 
D)  $1,000

Question 10

The monetary base increased by 20 percent during the contraction of 1929-1933,but the money supply fell by 25 percent.Explain why this occurred.How can the money supply fall when the base increases?

Accepted Answer

The banking crisis caused the public to

Question 11

The monetary base consists of ________.

Accepted Answer

A)  notes in circulation and Canada bonds 
B)  notes in circulation and securities 
C)  notes in circulation and reserves 
D)  reserves and Canada bonds 
A)  notes in circulation and Canada bonds 
B)  notes in circulation and securities 
C)  notes in circulation and reserves 
D)  reserves and Canada bonds

Question 12

Assuming initially that r = 10 percent and c = 40 percent,an increase in r to 15 percent causes ________.

Accepted Answer

A)  the money multiplier to increase from 2.55 to 2.8 
B)  the money multiplier to decrease from 2.8 to 2.55 
C)  the money multiplier to increase from 1.82 to 2 
D)  no change in the money multiplier 
A)  the money multiplier to increase from 2.55 to 2.8 
B)  the money multiplier to decrease from 2.8 to 2.55 
C)  the money multiplier to increase from 1.82 to 2 
D)  no change in the money multiplier

Question 13

If the desired reserve ratio is fifteen percent,currency in circulation is $400 billion,and chequable deposits are $1000 billion,then the money multiplier is approximately ________.

Accepted Answer

A)  2.55 
B)  2.67 
C)  2.35 
D)  0.551 
A)  2.55 
B)  2.67 
C)  2.35 
D)  0.551

Question 14

When a bank sells a government bond to the Bank of Canada,reserves in the banking system ________ and the monetary base ________,everything else held constant.

Accepted Answer

A)  increase; increases 
B)  increase; decreases 
C)  decrease; increases 
D)  decrease; decreases 
A)  increase; increases 
B)  increase; decreases 
C)  decrease; increases 
D)  decrease; decreases

Question 15

The volume of loans that the Bank of Canada makes to banks is affected by the Bank's setting of the interest rate on these loans,called the ________.

Accepted Answer

A)  overnight rate 
B)  prime rate 
C)  bank rate 
D)  interbank rate 
A)  overnight rate 
B)  prime rate 
C)  bank rate 
D)  interbank rate

Question 16

If a member of the nonbank public sells a government bond to the Bank of Canada in exchange for currency,the monetary base will ________,but ________.

Accepted Answer

A)  remain unchanged; reserves will fall 
B)  remain unchanged; reserves will rise 
C)  rise; currency in circulation will remain unchanged 
D)  rise; reserves will remain unchanged 
A)  remain unchanged; reserves will fall 
B)  remain unchanged; reserves will rise 
C)  rise; currency in circulation will remain unchanged 
D)  rise; reserves will remain unchanged

Question 17

If reserves in the banking system increase by $100,then chequable deposits will increase by $2,000 in the simple model of deposit creation when the desired reserve ratio is ________.

Accepted Answer

A)  0.01 
B)  0.05 
C)  0.10 
D)  0.20 
A)  0.01 
B)  0.05 
C)  0.10 
D)  0.20

Question 18

If the desired reserve ratio is one-third,currency in circulation is $300 billion,and chequable deposits are $900 billion,then the currency ratio is ________.

Accepted Answer

A)  .25 
B)  .33 
C)  .,67 
D)  .375 
A)  .25 
B)  .33 
C)  .,67 
D)  .375

Question 19

If a bank has excess reserves of $7,000 and demand deposit liabilities of $100,000,and if the reserve requirement is 10 percent,then the bank has actual reserves of ________.

Accepted Answer

A)  $14,000 
B)  $17,000 
C)  $22,000 
D)  $27,000 
A)  $14,000 
B)  $17,000 
C)  $22,000 
D)  $27,000

Question 20

If the money supply is equal to $400 billion and the monetary base is equal to $100 billion,the money multiplier is equal to ________.

Accepted Answer

A)  4 
B)  0.25 
C)  5 
D)  cannot be determined 
A)  4 
B)  0.25 
C)  5 
D)  cannot be determined

Exam 16: The Money Supply Process

In the model of the money supply process,the Bank of Canada's role in influencing the money supply is represented by ________.

The government agency that oversees the banking system and is responsible for the conduct of monetary policy in Canada is ________.

If reserves in the banking system increase by $100,then chequable deposits will increase by $1000 in the simple model of deposit creation when the desired reserve ratio is ________.

If the desired reserve ratio is 20 percent,the simple deposit multiplier is ________.

If a bank has excess reserves of $4,000 and demand deposit liabilities of $100,000,and if the reserve requirement is 15 percent,then the bank has actual reserves of ________.

Recognizing the distinction between advances to banks and the nonborrowed monetary base,the money supply model is specified as ________.

If the desired reserve ratio is 15 percent,the simple deposit multiplier is ________.

If the desired reserve ratio is one-third,currency in circulation is $300 billion,and chequable deposits are $900 billion,then the money supply is ________.

In the simple deposit expansion model,if the desired reserve ratio is 20 percent and the Bank of Canada increases reserves by $100,chequable deposits can potentially expand by ________.

The monetary base increased by 20 percent during the contraction of 1929-1933,but the money supply fell by 25 percent.Explain why this occurred.How can the money supply fall when the base increases?

The monetary base consists of ________.

Assuming initially that r = 10 percent and c = 40 percent,an increase in r to 15 percent causes ________.

If the desired reserve ratio is fifteen percent,currency in circulation is $400 billion,and chequable deposits are $1000 billion,then the money multiplier is approximately ________.

When a bank sells a government bond to the Bank of Canada,reserves in the banking system ________ and the monetary base ________,everything else held constant.

The volume of loans that the Bank of Canada makes to banks is affected by the Bank's setting of the interest rate on these loans,called the ________.

If a member of the nonbank public sells a government bond to the Bank of Canada in exchange for currency,the monetary base will ________,but ________.

If reserves in the banking system increase by $100,then chequable deposits will increase by $2,000 in the simple model of deposit creation when the desired reserve ratio is ________.

If the desired reserve ratio is one-third,currency in circulation is $300 billion,and chequable deposits are $900 billion,then the currency ratio is ________.

If a bank has excess reserves of $7,000 and demand deposit liabilities of $100,000,and if the reserve requirement is 10 percent,then the bank has actual reserves of ________.

If the money supply is equal to $400 billion and the monetary base is equal to $100 billion,the money multiplier is equal to ________.

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behaviour of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Financial Crises

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Nonbank Finance

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

The ISLM Model

Filters

When a bank sells a government bond to the Bank of Canada,reserves in the banking system and the monetary base ,everything else held constant.

If a member of the nonbank public sells a government bond to the Bank of Canada in exchange for currency,the monetary base will ,but .