Question 1

If the desired reserve ratio is 25 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 2

When the Bank of Canada calls in a loan from a bank, the monetary base ________ and reserves ________.

Accepted Answer

A) remains unchanged; decrease 
B) remains unchanged; increase 
C) decreases; decrease 
D) decreases; remains unchanged 
A) remains unchanged; decrease 
B) remains unchanged; increase 
C) decreases; decrease 
D) decreases; remains unchanged

Question 3

When currency is equal to $100 billion and reserves are equal to $200 billion, and we know that the money multiplier is equal to 2.5, then the money supply will be equal to ________.

Accepted Answer

A) $750 billion 
B) $250 billion 
C) $300 billion 
D) $450 billion 
A) $750 billion 
B) $250 billion 
C) $300 billion 
D) $450 billion

Question 4

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 5

If reserves in the Bank of Canada increase by $100, then chequable deposits will increase by $400 in the simple model of deposit creation when the desired reserve ratio is ________.

Accepted Answer

A) 0)01 
B) 0)10 
C) 0)20 
D) 0)25 
A) 0)01 
B) 0)10 
C) 0)20 
D) 0)25

Question 6

When a member of the nonbank public deposits currency into her bank account, ________.

Accepted Answer

A) both the monetary base and bank reserves fall 
B) both the monetary base and bank reserves rise 
C) the monetary base falls, but bank reserves remain unchanged 
D) bank reserves rise, but the monetary base remains unchanged 
A) both the monetary base and bank reserves fall 
B) both the monetary base and bank reserves rise 
C) the monetary base falls, but bank reserves remain unchanged 
D) bank reserves rise, but the monetary base remains unchanged

Question 7

An increase in ________ leads to an equal ________ in the monetary base in the short run.

Accepted Answer

A) float; decrease 
B) float; increase 
C) advances to banks; decrease 
D) deposits at the Bank; increase 
A) float; decrease 
B) float; increase 
C) advances to banks; decrease 
D) deposits at the Bank; increase

Question 8

When the monetary base is equal to $200 billion, the desired reserve ratio is 0.10 and the currency ratio is equal to 0.20, the money supply is equal to ________.

Accepted Answer

A) $800 billion 
B) $600 billion 
C) $500 billion 
D) $300 billion 
A) $800 billion 
B) $600 billion 
C) $500 billion 
D) $300 billion

Question 9

The formula for the simple deposit multiplier can be expressed as ________.

Accepted Answer

A) △R =   × △T 
B) △D =   × △R 
C) △r =   × △T 
D) △R =   × △D 
A) △R =   × △T 
B) △D =   × △R 
C) △r =   × △T 
D) △R =   × △D

Question 10

How do changes in the desired reserve ratio affect the money multiplier?

Accepted Answer

Students can show this in two ways:
a.Th

Question 11

If reserves in the banking system increase by $100, then chequable deposits will increase by $500 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 12

If the desired reserve ratio is fifteen percent, currency in circulation is $400 billion, and chequable deposits are $800 billion, then the money multiplier is approximately ________.

Accepted Answer

A) 2)5 
B) 1)67 
C) 2)3 
D) 0)651 
A) 2)5 
B) 1)67 
C) 2)3 
D) 0)651

Question 13

If the desired reserve ratio is ten percent, currency in circulation is $400 billion, chequable deposits are $1000 billion, and excess reserves total $1 billion, then the excess reserves-chequable deposit ratio is ________.

Accepted Answer

A) 0)01 
B) 0)10 
C) 0)001 
D) 0)05 
A) 0)01 
B) 0)10 
C) 0)001 
D) 0)05

Question 14

If the desired reserve ratio is ten percent, currency in circulation is $400 billion, and chequable deposits are $800 billion, then the money multiplier is approximately ________.

Accepted Answer

A) 2)5 
B) 1)67 
C) 2)0 
D) 0)601 
A) 2)5 
B) 1)67 
C) 2)0 
D) 0)601

Question 15

All else the same, when the Bank calls in a $100 loan previously extended to the First National Bank, reserves in the banking system ________.

Accepted Answer

A) increase by $100 
B) increase by more than $100 
C) decrease by $100 
D) decrease by more than $100 
A) increase by $100 
B) increase by more than $100 
C) decrease by $100 
D) decrease by more than $100

Question 16

During the banking panic that occurred in the United States between October 1930 and January 1931, ________.

Accepted Answer

A) both c and {ER/D} rose 
B) {ER/D} more than doubled 
C) the money supply declined sharply 
D) All of the above. 
A) both c and {ER/D} rose 
B) {ER/D} more than doubled 
C) the money supply declined sharply 
D) All of the above.

Question 17

The sum of the Bank of Canada's monetary liabilities and the Canadian Mint's monetary liabilities is called ________.

Accepted Answer

A) the money supply 
B) notes in circulation 
C) bank reserves 
D) the monetary base 
A) the money supply 
B) notes in circulation 
C) bank reserves 
D) the monetary base

Question 18

Everything else held constant, a decrease in the currency ratio will mean ________ in the M2+ money multiplier.

Accepted Answer

A) an increase 
B) a decrease 
C) a reversal 
D) no change 
A) an increase 
B) a decrease 
C) a reversal 
D) no change

Question 19

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

Accepted Answer

A) only the desired reserve ratio 
B) both the desired reserve ratio and the market interest rate 
C) only the currency ratio 
D) only borrowed reserves 
A) only the desired reserve ratio 
B) both the desired reserve ratio and the market interest rate 
C) only the currency ratio 
D) only borrowed reserves

Question 20

If a bank has excess reserves of $7000 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) $14000 
B) $17000 
C) $22000 
D) $27000 
A) $14000 
B) $17000 
C) $22000 
D) $27000

Exam 15: The Money Supply Process

If the desired reserve ratio is 25 percent, the simple deposit multiplier is ________.

When the Bank of Canada calls in a loan from a bank, the monetary base ________ and reserves ________.

When currency is equal to $100 billion and reserves are equal to $200 billion, and we know that the money multiplier is equal to 2.5, then the money supply will be equal to ________.

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

If reserves in the Bank of Canada increase by $100, then chequable deposits will increase by $400 in the simple model of deposit creation when the desired reserve ratio is ________.

When a member of the nonbank public deposits currency into her bank account, ________.

An increase in ________ leads to an equal ________ in the monetary base in the short run.

When the monetary base is equal to $200 billion, the desired reserve ratio is 0.10 and the currency ratio is equal to 0.20, the money supply is equal to ________.

The formula for the simple deposit multiplier can be expressed as ________.

How do changes in the desired reserve ratio affect the money multiplier?

If reserves in the banking system increase by $100, then chequable deposits will increase by $500 in the simple model of deposit creation when the desired reserve ratio is ________.

If the desired reserve ratio is fifteen percent, currency in circulation is $400 billion, and chequable deposits are $800 billion, then the money multiplier is approximately ________.

If the desired reserve ratio is ten percent, currency in circulation is $400 billion, chequable deposits are $1000 billion, and excess reserves total $1 billion, then the excess reserves-chequable deposit ratio is ________.

If the desired reserve ratio is ten percent, currency in circulation is $400 billion, and chequable deposits are $800 billion, then the money multiplier is approximately ________.

All else the same, when the Bank calls in a $100 loan previously extended to the First National Bank, reserves in the banking system ________.

During the banking panic that occurred in the United States between October 1930 and January 1931, ________.

The sum of the Bank of Canada's monetary liabilities and the Canadian Mint's monetary liabilities is called ________.

Everything else held constant, a decrease in the currency ratio will mean ________ in the M2+ money multiplier.

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

If a bank has excess reserves of $7000 and demand deposit liabilities of $100,000, and if the reserve requirement is 10 percent, then the bank has actual reserves of ________.

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

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

Financial Crises in Emerging Markets

The ISLM Model

Non-Bank Finance

Filters

When the Bank of Canada calls in a loan from a bank, the monetary base and reserves .

An increase in leads to an equal in the monetary base in the short run.