Question 1

What will the Bank of Canada do to expand the money supply?

Accepted Answer

A) It will order new Bank of Canada notes delivered to chartered banks. 
B) It will sell government securities, thus increasing the velocity of circulation of the money supply. 
C) It will purchase government securities, thus putting more reserves in the hands of banks. 
D) It will raise the bank rate. 
A) It will order new Bank of Canada notes delivered to chartered banks. 
B) It will sell government securities, thus increasing the velocity of circulation of the money supply. 
C) It will purchase government securities, thus putting more reserves in the hands of banks. 
D) It will raise the bank rate.

Question 2

If the target for the overnight lending rate is 5 percent,what would be the respective bank rate?

Accepted Answer

A) 4.75 percent 
B) 5 percent 
C) 5.25 percent 
D) 5.5 percent 
A) 4.75 percent 
B) 5 percent 
C) 5.25 percent 
D) 5.5 percent

Question 3

What can the Bank of Canada do to increase the rate of growth of the money supply?

Accepted Answer

A) purchase stocks on the stock market 
B) raise the bank rate 
C) lower the bank rate 
D) sell government securities on the open market 
A) purchase stocks on the stock market 
B) raise the bank rate 
C) lower the bank rate 
D) sell government securities on the open market

Question 4

If the Bank of Canada buys a government bond from a member of the public,what is the effect on the banking system and the money supply?

Accepted Answer

A) The banking system has less reserves, and the money supply tends to fall. 
B) The banking system has less reserves, and the money supply tends to grow. 
C) The banking system has more reserves, and the money supply tends to grow. 
D) The banking system has more reserves, and the money supply tends to fall. 
A) The banking system has less reserves, and the money supply tends to fall. 
B) The banking system has less reserves, and the money supply tends to grow. 
C) The banking system has more reserves, and the money supply tends to grow. 
D) The banking system has more reserves, and the money supply tends to fall.

Question 5

If the Bank of Canada sells a government bond to an investment dealer,what is the effect on the money supply?

Accepted Answer

A) It will shrink only if the Bank of Canada takes no reserves as payment. 
B) It will not change. 
C) It will shrink. 
D) It will increase. 
A) It will shrink only if the Bank of Canada takes no reserves as payment. 
B) It will not change. 
C) It will shrink. 
D) It will increase.

Question 6

Under which of the following circumstances is an increase in the money supply and a decrease in real GDP at the same time consistent with the equation of exchange?

Accepted Answer

A) if the price level falls rapidly enough 
B) if the price level remains constant 
C) if velocity rises rapidly enough 
D) if velocity falls rapidly enough 
A) if the price level falls rapidly enough 
B) if the price level remains constant 
C) if velocity rises rapidly enough 
D) if velocity falls rapidly enough

Question 7

According to the equation of exchange,what would result from a change in the money supply of 6.5 percent,holding velocity constant?

Accepted Answer

A) a 6.5 percent change in nominal GDP 
B) a 6.5 percent change in aggregate supply 
C) a 6.5 percent change in real GDP 
D) a 6.5 percent change in velocity 
A) a 6.5 percent change in nominal GDP 
B) a 6.5 percent change in aggregate supply 
C) a 6.5 percent change in real GDP 
D) a 6.5 percent change in velocity

Question 8

What does the P in the equation of exchange represent?

Accepted Answer

A) marginal level of prices 
B) marginal propensity to spend 
C) average level of prices of final goods and services in the economy 
D) profit earned in the economy 
A) marginal level of prices 
B) marginal propensity to spend 
C) average level of prices of final goods and services in the economy 
D) profit earned in the economy

Question 9

Which of the following is NOT a function of the Bank of Canada?

Accepted Answer

A) limiting the national debt 
B) controlling inflation 
C) buying and selling government bonds to control the size and growth rate of the money supply 
D) managing the federal government's bank accounts 
A) limiting the national debt 
B) controlling inflation 
C) buying and selling government bonds to control the size and growth rate of the money supply 
D) managing the federal government's bank accounts

Question 10

What is the equation of velocity?

Accepted Answer

A) nominal GDP / real GDP 
B) value of final goods and services produced / money supply 
C) (P × Q) / (M × V) 
D) real GDP / M 
A) nominal GDP / real GDP 
B) value of final goods and services produced / money supply 
C) (P × Q) / (M × V) 
D) real GDP / M

Question 11

The Bank of Canada oversees the reserves of the chartered banks through the sale and purchase of government securities.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements about the monetary policies generated by the Bank of Canada is the most accurate?

Accepted Answer

A) They must be consistent with fiscal policies that are made in Parliament. 
B) They are sometimes inconsistent with fiscal policies. 
C) They must be ratified by Parliament. 
D) They must be approved by the minister of finance. 
A) They must be consistent with fiscal policies that are made in Parliament. 
B) They are sometimes inconsistent with fiscal policies. 
C) They must be ratified by Parliament. 
D) They must be approved by the minister of finance.

Question 13

What is the most important function of the Bank of Canada?

Accepted Answer

A) regulating the Canadian financial system 
B) regulating the supply of money 
C) raising or lowering taxes 
D) increasing or reducing government spending 
A) regulating the Canadian financial system 
B) regulating the supply of money 
C) raising or lowering taxes 
D) increasing or reducing government spending

Question 14

If velocity is relatively stable and the central bank persistently increases the money supply faster than the rate of real output,what will result?

Accepted Answer

A) recession 
B) unemployment 
C) inflation 
D) stagflation 
A) recession 
B) unemployment 
C) inflation 
D) stagflation

Question 15

During the sixteenth century,Spanish conquistadors like Hernan Cortes overwhelmed the Aztecs and other indigenous peoples in America by pillaging their cities and taking their gold and silver.The gold and silver was sent back to Spain,causing its money supply to increase tenfold.Assuming V remained stable and Q increased slightly,what do you think happened to prices in Spain during this period?

Accepted Answer

According to the equation of exchange,if

Question 16

What is the impact on GDP if M increases and V remains constant?

Accepted Answer

A) real GDP decreases 
B) nominal GDP decreases 
C) real GDP increases 
D) nominal GDP increases 
A) real GDP decreases 
B) nominal GDP decreases 
C) real GDP increases 
D) nominal GDP increases

Question 17

Open market operations directly change the rate of interest at which banks can borrow reserves from the Bank of Canada.

Accepted Answer

A) True 
 B)False

Question 18

What is most frequently used when the Bank of Canada is attempting to adjust the money supply?

Accepted Answer

A) taxation 
B) open market operations 
C) deposit switching 
D) moral suasion 
A) taxation 
B) open market operations 
C) deposit switching 
D) moral suasion

Question 19

The Bank of Canada was established in 1935 and is owned by the federal government.

Accepted Answer

A) True 
 B)False

Question 20

If the Bank of Canada lowers the bank rate,what will be the effect on the money supply?

Accepted Answer

A) It will tend to increase the money supply. 
B) It will have no effect, since there has been no deposit to begin an expansion or contraction process. 
C) It will decrease the amount of money available to the banking system. 
D) It will tend to decrease the money supply. 
A) It will tend to increase the money supply. 
B) It will have no effect, since there has been no deposit to begin an expansion or contraction process. 
C) It will decrease the amount of money available to the banking system. 
D) It will tend to decrease the money supply.

What will the Bank of Canada do to expand the money supply?

If the target for the overnight lending rate is 5 percent,what would be the respective bank rate?

What can the Bank of Canada do to increase the rate of growth of the money supply?

If the Bank of Canada buys a government bond from a member of the public,what is the effect on the banking system and the money supply?

If the Bank of Canada sells a government bond to an investment dealer,what is the effect on the money supply?

Under which of the following circumstances is an increase in the money supply and a decrease in real GDP at the same time consistent with the equation of exchange?

According to the equation of exchange,what would result from a change in the money supply of 6.5 percent,holding velocity constant?

What does the P in the equation of exchange represent?

Which of the following is NOT a function of the Bank of Canada?

What is the equation of velocity?

The Bank of Canada oversees the reserves of the chartered banks through the sale and purchase of government securities.

Which of the following statements about the monetary policies generated by the Bank of Canada is the most accurate?

What is the most important function of the Bank of Canada?

If velocity is relatively stable and the central bank persistently increases the money supply faster than the rate of real output,what will result?

What is the impact on GDP if M increases and V remains constant?

Open market operations directly change the rate of interest at which banks can borrow reserves from the Bank of Canada.

What is most frequently used when the Bank of Canada is attempting to adjust the money supply?

The Bank of Canada was established in 1935 and is owned by the federal government.

If the Bank of Canada lowers the bank rate,what will be the effect on the 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

Money and the Banking System

Monetary Policy

International Trade

International Finance

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Exam 12: The Bank of Canada

What will the Bank of Canada do to expand the money supply?

If the target for the overnight lending rate is 5 percent,what would be the respective bank rate?

What can the Bank of Canada do to increase the rate of growth of the money supply?

If the Bank of Canada buys a government bond from a member of the public,what is the effect on the banking system and the money supply?

If the Bank of Canada sells a government bond to an investment dealer,what is the effect on the money supply?

Under which of the following circumstances is an increase in the money supply and a decrease in real GDP at the same time consistent with the equation of exchange?

According to the equation of exchange,what would result from a change in the money supply of 6.5 percent,holding velocity constant?

What does the P in the equation of exchange represent?

Which of the following is NOT a function of the Bank of Canada?

What is the equation of velocity?

The Bank of Canada oversees the reserves of the chartered banks through the sale and purchase of government securities.

Which of the following statements about the monetary policies generated by the Bank of Canada is the most accurate?

What is the most important function of the Bank of Canada?

If velocity is relatively stable and the central bank persistently increases the money supply faster than the rate of real output,what will result?

What is the impact on GDP if M increases and V remains constant?

Open market operations directly change the rate of interest at which banks can borrow reserves from the Bank of Canada.

What is most frequently used when the Bank of Canada is attempting to adjust the money supply?

The Bank of Canada was established in 1935 and is owned by the federal government.

If the Bank of Canada lowers the bank rate,what will be the effect on the 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

Money and the Banking System

Monetary Policy

International Trade

International Finance

Filters