Question 1

Are Canadian treasury bills held by chartered banks an asset or a liability?

Accepted Answer

A) They are government liabilities and chartered bank assets. 
B) They are government assets and chartered bank liabilities. 
C) They are government liabilities and chartered bank liabilities. 
D) They are government assets and chartered bank assets. 
A) They are government liabilities and chartered bank assets. 
B) They are government assets and chartered bank liabilities. 
C) They are government liabilities and chartered bank liabilities. 
D) They are government assets and chartered bank assets.

Question 2

The existence of inflation and other possible uncertainties reduces the usefulness of money as a store of value.

Accepted Answer

A) True 
 B)False

Question 3

What is fiat money? Why is fiat money important in Canada today?

Accepted Answer

Fiat (from the Latin for "let it be done

Question 4

What effect would a withdrawal of currency from your credit union savings account have?

Accepted Answer

A) It would increase M2 but have no effect on M2+. 
B) It would decrease both M2 and M2+. 
C) It would increase both M2 and M2+. 
D) It would decrease M2+ but have no effect on M2. 
A) It would increase M2 but have no effect on M2+. 
B) It would decrease both M2 and M2+. 
C) It would increase both M2 and M2+. 
D) It would decrease M2+ but have no effect on M2.

Question 5

If a bank has $1 million in demand deposits,$350 000 in reserves,and desires a 30 percent reserve ratio,how much money could a bank directly create by loaning out its excess reserves?

Accepted Answer

A) $50 000 
B) $300 000 
C) $350 000 
D) $700 000 
A) $50 000 
B) $300 000 
C) $350 000 
D) $700 000

Question 6

A majority of Canadian money,whether M2 or M2+,is created by private businesses.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements about a bank's capital is the most accurate?

Accepted Answer

A) It is the value of its physical plant, including buildings, computers, and automatic teller machines. 
B) It is the value of all its assets, including loans. 
C) It is the value of all its assets, excluding loans. 
D) It is the difference between its assets and liabilities. 
A) It is the value of its physical plant, including buildings, computers, and automatic teller machines. 
B) It is the value of all its assets, including loans. 
C) It is the value of all its assets, excluding loans. 
D) It is the difference between its assets and liabilities.

Question 8

What effect would a decrease in currency in circulation combined with an equal increase in savings account deposits have?

Accepted Answer

A) It would increase M2 but have no effect on M2+. 
B) It would decrease both M2 and M2+. 
C) It would increase both M2 and M2+. 
D) It would have no effect on either M2 or M2+. 
A) It would increase M2 but have no effect on M2+. 
B) It would decrease both M2 and M2+. 
C) It would increase both M2 and M2+. 
D) It would have no effect on either M2 or M2+.

Question 9

If a banking transaction created new excess reserves in the banking system,what would the impact be on the amount of loans made by banks and the money supply?

Accepted Answer

A) an increase in the amount of loans made by banks and a decrease in the supply of money 
B) an increase in the amount of loans made by banks and an increase in the supply of money 
C) a decrease in the amount of loans made by banks and a decrease in the supply of money 
D) a decrease in the amount of loans made by banks and an increase in the supply of money 
A) an increase in the amount of loans made by banks and a decrease in the supply of money 
B) an increase in the amount of loans made by banks and an increase in the supply of money 
C) a decrease in the amount of loans made by banks and a decrease in the supply of money 
D) a decrease in the amount of loans made by banks and an increase in the supply of money

Question 10

Are demand deposits an asset or a liability for banks and depositors?

Accepted Answer

A) They are liabilities of banks and assets of depositors. 
B) They are assets of banks and their depositors. 
C) They are liabilities of banks and their depositors. 
D) They are assets of banks and liabilities of depositors. 
A) They are liabilities of banks and assets of depositors. 
B) They are assets of banks and their depositors. 
C) They are liabilities of banks and their depositors. 
D) They are assets of banks and liabilities of depositors.

Question 11

Which of the following is the best definition of money?

Accepted Answer

A) anything that is a liability of the federal government 
B) coins and currency in the hands of the public 
C) anything that is a liability of a chartered bank 
D) anything generally accepted as a payment for goods or repayment of debt 
A) anything that is a liability of the federal government 
B) coins and currency in the hands of the public 
C) anything that is a liability of a chartered bank 
D) anything generally accepted as a payment for goods or repayment of debt

Question 12

Money almost always serves as the standard unit for quoting prices.What is another way of saying this?

Accepted Answer

A) Money serves as a medium of exchange. 
B) Money serves as a store of value. 
C) Money serves as a measure of value. 
D) Money serves as a commodity itself. 
A) Money serves as a medium of exchange. 
B) Money serves as a store of value. 
C) Money serves as a measure of value. 
D) Money serves as a commodity itself.

Question 13

If the desired reserve ratio is 15 percent and a customer makes a new cash deposit of $50 000,how much new excess reserves are created?

Accepted Answer

A) $7500 
B) roughly $33 000 
C) $67 500 
D) $42 500 
A) $7500 
B) roughly $33 000 
C) $67 500 
D) $42 500

Question 14

A bank receives a demand deposit of $5000.The bank loans out $3500 of this deposit and increases its excess reserves by $500.What is the desired reserve ratio?

Accepted Answer

A) 10 percent 
B) 20 percent 
C) 40 percent 
D) 60 percent 
A) 10 percent 
B) 20 percent 
C) 40 percent 
D) 60 percent

Question 15

Scenario 11-2
A bank's assets consist of $1 000 000 in total reserves, $2 100 000 in loans, and a building worth $1 200 000. Its liabilities and capital consist of $3 000 000 in demand deposits and $1 300 000 in capital.
-Refer to Scenario 11-2.If the desired reserve ratio is 10 percent,what is the level of the bank's excess reserves and how much money could the excess reserves be used to create in the banking system as a result?

Accepted Answer

A) Excess reserves are $700 000 and could be used to create $700 000 in the banking system. 
B) Excess reserves are $300 000 and could be used to create $3 000 000 in the banking system. 
C) Excess reserves are $300 000 and could be used to create $300 000 in the banking system. 
D) Excess reserves are $700 000 and could be used to create $7 000 000 in the banking system. 
A) Excess reserves are $700 000 and could be used to create $700 000 in the banking system. 
B) Excess reserves are $300 000 and could be used to create $3 000 000 in the banking system. 
C) Excess reserves are $300 000 and could be used to create $300 000 in the banking system. 
D) Excess reserves are $700 000 and could be used to create $7 000 000 in the banking system.

Question 16

Suppose you found $1000 hidden in your mattress and deposited it in a demand deposit account at your bank.If the desired reserve ratio was 20 percent,how much would the deposit directly create in excess reserves?

Accepted Answer

A) $200 
B) $800 
C) $1000 
D) $1200 
A) $200 
B) $800 
C) $1000 
D) $1200

Question 17

Which of the following assets is most liquid?

Accepted Answer

A) a television 
B) funds in a savings account 
C) ten hectares of land 
D) a car 
A) a television 
B) funds in a savings account 
C) ten hectares of land 
D) a car

Question 18

What point do virtually all economists agree on when defining money?

Accepted Answer

A) Money must be issued by the government. 
B) Money must be generally accepted. 
C) Money must be legal tender. 
D) Money must be made of a precious metal. 
A) Money must be issued by the government. 
B) Money must be generally accepted. 
C) Money must be legal tender. 
D) Money must be made of a precious metal.

Question 19

Scenario 11-1
A bank's assets consist of $500 000 in total reserves, $1 600 000 in loans, and a building worth $1 200 000. Its liabilities and capital consist of $2 000 000 in demand deposits and $1 300 000 in capital.
-Refer to Scenario 11-1.If the desired reserve ratio is 25 percent,what is the level of the bank's excess reserves and how much money could the excess reserves be used to create in the banking system as a result?

Accepted Answer

A) Excess reserves are $250 000 and could be used to create $1 000 000 in the banking system. 
B) Excess reserves are $500 000 and could be used to create $2 000 000 in the banking system. 
C) Excess reserves are $500 000 and could be used to create $500 000 in the banking system. 
D) Excess reserves are zero and could not be used to create any money in the banking system. 
A) Excess reserves are $250 000 and could be used to create $1 000 000 in the banking system. 
B) Excess reserves are $500 000 and could be used to create $2 000 000 in the banking system. 
C) Excess reserves are $500 000 and could be used to create $500 000 in the banking system. 
D) Excess reserves are zero and could not be used to create any money in the banking system.

Question 20

There are several motives for holding assets in the form of money.Identify three and provide an example of each.

Accepted Answer

There are three main reasons for holding

Are Canadian treasury bills held by chartered banks an asset or a liability?

The existence of inflation and other possible uncertainties reduces the usefulness of money as a store of value.

What is fiat money? Why is fiat money important in Canada today?

What effect would a withdrawal of currency from your credit union savings account have?

If a bank has $1 million in demand deposits,$350 000 in reserves,and desires a 30 percent reserve ratio,how much money could a bank directly create by loaning out its excess reserves?

A majority of Canadian money,whether M2 or M2+,is created by private businesses.

Which of the following statements about a bank's capital is the most accurate?

What effect would a decrease in currency in circulation combined with an equal increase in savings account deposits have?

If a banking transaction created new excess reserves in the banking system,what would the impact be on the amount of loans made by banks and the money supply?

Are demand deposits an asset or a liability for banks and depositors?

Which of the following is the best definition of money?

Money almost always serves as the standard unit for quoting prices.What is another way of saying this?

If the desired reserve ratio is 15 percent and a customer makes a new cash deposit of $50 000,how much new excess reserves are created?

A bank receives a demand deposit of $5000.The bank loans out $3500 of this deposit and increases its excess reserves by $500.What is the desired reserve ratio?

Suppose you found $1000 hidden in your mattress and deposited it in a demand deposit account at your bank.If the desired reserve ratio was 20 percent,how much would the deposit directly create in excess reserves?

Which of the following assets is most liquid?

What point do virtually all economists agree on when defining money?

There are several motives for holding assets in the form of money.Identify three and provide an example of each.

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

Are Canadian treasury bills held by chartered banks an asset or a liability?

The existence of inflation and other possible uncertainties reduces the usefulness of money as a store of value.

What is fiat money? Why is fiat money important in Canada today?

What effect would a withdrawal of currency from your credit union savings account have?

If a bank has $1 million in demand deposits,$350 000 in reserves,and desires a 30 percent reserve ratio,how much money could a bank directly create by loaning out its excess reserves?

A majority of Canadian money,whether M2 or M2+,is created by private businesses.

Which of the following statements about a bank's capital is the most accurate?

What effect would a decrease in currency in circulation combined with an equal increase in savings account deposits have?

If a banking transaction created new excess reserves in the banking system,what would the impact be on the amount of loans made by banks and the money supply?

Are demand deposits an asset or a liability for banks and depositors?

Which of the following is the best definition of money?

Money almost always serves as the standard unit for quoting prices.What is another way of saying this?

If the desired reserve ratio is 15 percent and a customer makes a new cash deposit of $50 000,how much new excess reserves are created?

A bank receives a demand deposit of $5000.The bank loans out $3500 of this deposit and increases its excess reserves by $500.What is the desired reserve ratio?

Suppose you found $1000 hidden in your mattress and deposited it in a demand deposit account at your bank.If the desired reserve ratio was 20 percent,how much would the deposit directly create in excess reserves?

Which of the following assets is most liquid?

What point do virtually all economists agree on when defining money?

There are several motives for holding assets in the form of money.Identify three and provide an example of each.

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