Question 1

The more widely held and accepted credit cards are,the more money people would be expected to hold in the form of currency.

Accepted Answer

A) True 
 B)False

Question 2

What information does the formula (1 / desired reserve ratio)give you?

Accepted Answer

A) the money multiplier 
B) the money supply 
C) the money demand 
D) the money reserve 
A) the money multiplier 
B) the money supply 
C) the money demand 
D) the money reserve

Question 3

If you deposit $8000 in a bank,calculate how much the bank must keep as reserves and how much it can loan out if the desired reserve ratio is 5 percent.How much if it is 8 percent? 13 percent? 26 percent?

Accepted Answer

With a required reserve ratio of 5 perce

Question 4

A chartered bank has $1 000 000 of outstanding demand deposits and actual reserves of $300 000.If the desired reserve ratio is 20 percent,what is the maximum loan the bank can extend?

Accepted Answer

A) $0 
B) $100 000 
C) $300 000 
D) $700 000 
A) $0 
B) $100 000 
C) $300 000 
D) $700 000

Question 5

A bank receives a demand deposit of $2000.The bank loans out $1200 of this deposit and increases its excess reserves by $600.What is the desired reserve ratio?

Accepted Answer

A) 10 percent 
B) 30 percent 
C) 40 percent 
D) 60 percent 
A) 10 percent 
B) 30 percent 
C) 40 percent 
D) 60 percent

Question 6

If a bank has a reserve ratio of 20 percent,what is the money multiplier?

Accepted Answer

A) 1.25 
B) 2 
C) 5 
D) 20 
A) 1.25 
B) 2 
C) 5 
D) 20

Question 7

Why is barter inefficient when compared to using money for trading?

Accepted Answer

A) Potential buyers may not have appropriate items of value to sellers with which to barter. 
B) The government cannot tax the barter system. 
C) It cannot be done over long distances. 
D) Buyers and sellers don't always agree on value. 
A) Potential buyers may not have appropriate items of value to sellers with which to barter. 
B) The government cannot tax the barter system. 
C) It cannot be done over long distances. 
D) Buyers and sellers don't always agree on value.

Question 8

How many large chartered banks are there in Canada?

Accepted Answer

A) 1 
B) 3 
C) 6 
D) 20 
A) 1 
B) 3 
C) 6 
D) 20

Question 9

Under what definition of the money supply are demand deposits at VanCity Credit Union included?

Accepted Answer

A) They are included in the M1 definition of the money supply. 
B) They are included in the M2 definition of the money supply. 
C) They are included in the M2+ definition of the money supply. 
D) They are included in the M3 definition of the money supply. 
A) They are included in the M1 definition of the money supply. 
B) They are included in the M2 definition of the money supply. 
C) They are included in the M2+ definition of the money supply. 
D) They are included in the M3 definition of the money supply.

Question 10

If you transfer the balance of your savings account at your credit union to your chequing account at your bank,how would this affect M2 and M2+?

Accepted Answer

A) M2+ would fall and M2 would rise. 
B) M2+ would fall and M2 would stay the same. 
C) Both M2 and M2+ would fall. 
D) There would be no change in either M2 or M2+. 
A) M2+ would fall and M2 would rise. 
B) M2+ would fall and M2 would stay the same. 
C) Both M2 and M2+ would fall. 
D) There would be no change in either M2 or M2+.

Question 11

Banks create money when they increase demand deposits through the process of creating loans.

Accepted Answer

A) True 
 B)False

Question 12

Suppose all banks desire a uniform reserve requirement of 20 percent and the Firsttown Bank has zero excess reserves.If a new customer deposits $10 000,how much in new loans can the bank now extend?

Accepted Answer

A) up to a maximum of $2000 
B) up to a maximum of $8 000 
C) up to a maximum of $10 000 
D) up to a maximum of $50 000 
A) up to a maximum of $2000 
B) up to a maximum of $8 000 
C) up to a maximum of $10 000 
D) up to a maximum of $50 000

Question 13

Suppose you found $10 000 hidden under a rock and deposited it in a demand deposit account at your bank.If the desired reserve ratio was 20 percent,how much would your deposit add to total demand deposits?

Accepted Answer

A) $2 000 
B) $4 000 
C) $10 000 
D) $20 000 
A) $2 000 
B) $4 000 
C) $10 000 
D) $20 000

Question 14

Paper money is fiat money because it has been declared by government as a means of exchange.

Accepted Answer

A) True 
 B)False

Question 15

Reserves exist primarily to prevent bank failures.

Accepted Answer

A) True 
 B)False

Question 16

If a bank had demand deposits of $80 million and it desired a 25 percent reserve ratio,how much would it hold in reserve?

Accepted Answer

A) $20 million 
B) $40 million 
C) $60 million 
D) $80 million 
A) $20 million 
B) $40 million 
C) $60 million 
D) $80 million

Question 17

What impact would an increase in the reserves banks want to hold,together with people taking currency out of their demand deposit accounts,have on the money supply?

Accepted Answer

A) It would decrease the money supply. 
B) It would have an indeterminate effect on the money supply. 
C) It would increase the money supply. 
D) It would leave the money supply unchanged. 
A) It would decrease the money supply. 
B) It would have an indeterminate effect on the money supply. 
C) It would increase the money supply. 
D) It would leave the money supply unchanged.

Question 18

What is the definition of liquidity?

Accepted Answer

A) the value of fiat money when used to buy a good or a service 
B) the cash value of fiat money 
C) the ease with which an asset can be converted into cash 
D) the speed at which money is spent 
A) the value of fiat money when used to buy a good or a service 
B) the cash value of fiat money 
C) the ease with which an asset can be converted into cash 
D) the speed at which money is spent

Question 19

If a bank receiving a new deposit of $200 000 would be able,as a result,to increase its lending by,at most,$150 000,what is the desired reserve ratio?

Accepted Answer

A) 4 percent 
B) 25 percent 
C) 40 percent 
D) 50 percent 
A) 4 percent 
B) 25 percent 
C) 40 percent 
D) 50 percent

Question 20

Which of the following backs our money supply?

Accepted Answer

A) faith in the government's ability to provide a medium of exchange 
B) the words "This note is legal tender" 
C) precious metals because their value is constant over time 
D) the U.S. dollar 
A) faith in the government's ability to provide a medium of exchange 
B) the words "This note is legal tender" 
C) precious metals because their value is constant over time 
D) the U.S. dollar

The more widely held and accepted credit cards are,the more money people would be expected to hold in the form of currency.

What information does the formula (1 / desired reserve ratio)give you?

If you deposit $8000 in a bank,calculate how much the bank must keep as reserves and how much it can loan out if the desired reserve ratio is 5 percent.How much if it is 8 percent? 13 percent? 26 percent?

A chartered bank has $1 000 000 of outstanding demand deposits and actual reserves of $300 000.If the desired reserve ratio is 20 percent,what is the maximum loan the bank can extend?

A bank receives a demand deposit of $2000.The bank loans out $1200 of this deposit and increases its excess reserves by $600.What is the desired reserve ratio?

If a bank has a reserve ratio of 20 percent,what is the money multiplier?

Why is barter inefficient when compared to using money for trading?

How many large chartered banks are there in Canada?

Under what definition of the money supply are demand deposits at VanCity Credit Union included?

If you transfer the balance of your savings account at your credit union to your chequing account at your bank,how would this affect M2 and M2+?

Banks create money when they increase demand deposits through the process of creating loans.

Suppose all banks desire a uniform reserve requirement of 20 percent and the Firsttown Bank has zero excess reserves.If a new customer deposits $10 000,how much in new loans can the bank now extend?

Suppose you found $10 000 hidden under a rock and deposited it in a demand deposit account at your bank.If the desired reserve ratio was 20 percent,how much would your deposit add to total demand deposits?

Paper money is fiat money because it has been declared by government as a means of exchange.

Reserves exist primarily to prevent bank failures.

If a bank had demand deposits of $80 million and it desired a 25 percent reserve ratio,how much would it hold in reserve?

What impact would an increase in the reserves banks want to hold,together with people taking currency out of their demand deposit accounts,have on the money supply?

What is the definition of liquidity?

If a bank receiving a new deposit of $200 000 would be able,as a result,to increase its lending by,at most,$150 000,what is the desired reserve ratio?

Which of the following backs our money supply?

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Aggregate Supply and Macroeconomic Equilibrium

Fiscal Policy

The Bank of Canada

Monetary Policy

International Trade

International Finance

Filters

Exam 11: Money and the Banking System

The more widely held and accepted credit cards are,the more money people would be expected to hold in the form of currency.

What information does the formula (1 / desired reserve ratio)give you?

If you deposit $8000 in a bank,calculate how much the bank must keep as reserves and how much it can loan out if the desired reserve ratio is 5 percent.How much if it is 8 percent? 13 percent? 26 percent?

A chartered bank has $1 000 000 of outstanding demand deposits and actual reserves of $300 000.If the desired reserve ratio is 20 percent,what is the maximum loan the bank can extend?

A bank receives a demand deposit of $2000.The bank loans out $1200 of this deposit and increases its excess reserves by $600.What is the desired reserve ratio?

If a bank has a reserve ratio of 20 percent,what is the money multiplier?

Why is barter inefficient when compared to using money for trading?

How many large chartered banks are there in Canada?

Under what definition of the money supply are demand deposits at VanCity Credit Union included?

If you transfer the balance of your savings account at your credit union to your chequing account at your bank,how would this affect M2 and M2+?

Banks create money when they increase demand deposits through the process of creating loans.

Suppose all banks desire a uniform reserve requirement of 20 percent and the Firsttown Bank has zero excess reserves.If a new customer deposits $10 000,how much in new loans can the bank now extend?

Suppose you found $10 000 hidden under a rock and deposited it in a demand deposit account at your bank.If the desired reserve ratio was 20 percent,how much would your deposit add to total demand deposits?

Paper money is fiat money because it has been declared by government as a means of exchange.

Reserves exist primarily to prevent bank failures.

If a bank had demand deposits of $80 million and it desired a 25 percent reserve ratio,how much would it hold in reserve?

What impact would an increase in the reserves banks want to hold,together with people taking currency out of their demand deposit accounts,have on the money supply?

What is the definition of liquidity?

If a bank receiving a new deposit of $200 000 would be able,as a result,to increase its lending by,at most,$150 000,what is the desired reserve ratio?

Which of the following backs our money supply?

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Aggregate Supply and Macroeconomic Equilibrium

Fiscal Policy

The Bank of Canada

Monetary Policy

International Trade

International Finance

Filters