Question 1

If nominal GDP is $1200 billion and M2 is $150 billion,what is velocity?

Accepted Answer

A) 0.5 
B) 2 
C) 4 
D) 8 
A) 0.5 
B) 2 
C) 4 
D) 8

Question 2

If the velocity of money increases from 5 percent and real GDP increases 3 percent,what will the Bank of Canada need to do keep prices the same?

Accepted Answer

A) They would have to decrease the money supply by 8 percent. 
B) They would have to decrease the money supply by 2 percent. 
C) They would have to increase the money supply by 2 percent. 
D) They would have to increase the money supply by 8 percent. 
A) They would have to decrease the money supply by 8 percent. 
B) They would have to decrease the money supply by 2 percent. 
C) They would have to increase the money supply by 2 percent. 
D) They would have to increase the money supply by 8 percent.

Question 3

The equation of exchange is most useful when we try to assess the impact of change in the stock markets on the aggregate economy.

Accepted Answer

A) True 
 B)False

Question 4

What action by the Bank of Canada is likely to lead to a decrease in the money supply?

Accepted Answer

A) selling government securities in the open market 
B) switching government accounts from the chartered banks back to the Bank of Canada 
C) decreasing mortgage rates 
D) lowering the bank rate 
A) selling government securities in the open market 
B) switching government accounts from the chartered banks back to the Bank of Canada 
C) decreasing mortgage rates 
D) lowering the bank rate

Question 5

In Canada,monetary policy is the responsibility of the Bank of Canada.

Accepted Answer

A) True 
 B)False

Question 6

When the Bank of Canada buys a Canadian government bond,what impact does this have on the volume of loans issued by the banking system and investment?

Accepted Answer

A) The volume of loans issued by the banking system increases and investment will tend to decrease. 
B) The volume of loans issued by the banking system increases and investment will tend to increase. 
C) The volume of loans issued by the banking system decreases and investment will tend to increase. 
D) The volume of loans issued by the banking system decreases and investment will tend to decrease. 
A) The volume of loans issued by the banking system increases and investment will tend to decrease. 
B) The volume of loans issued by the banking system increases and investment will tend to increase. 
C) The volume of loans issued by the banking system decreases and investment will tend to increase. 
D) The volume of loans issued by the banking system decreases and investment will tend to decrease.

Question 7

Which of the following is NOT an objective of the Bank of Canada?

Accepted Answer

A) to regulate credit and currency 
B) to control and protect the external value of the Canadian dollar 
C) to mitigate fluctuations in the general level of economic activity 
D) to maintain a balanced federal budget 
A) to regulate credit and currency 
B) to control and protect the external value of the Canadian dollar 
C) to mitigate fluctuations in the general level of economic activity 
D) to maintain a balanced federal budget

Question 8

Velocity represents the average number of times that a dollar is used in purchasing final goods and services in a one-year period.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following would occur if the money supply (M)and the price level (P)were increasing at approximately the same rate?

Accepted Answer

A) Real GDP would be stable provided that velocity was stable. 
B) Nominal GDP would be stable provided that velocity was stable. 
C) The economy would be suffering from hyperinflation. 
D) Real GDP would be increasing if velocity were falling. 
A) Real GDP would be stable provided that velocity was stable. 
B) Nominal GDP would be stable provided that velocity was stable. 
C) The economy would be suffering from hyperinflation. 
D) Real GDP would be increasing if velocity were falling.

Question 10

Which of the following best describes the role of the Bank of Canada as the lender of last resort?

Accepted Answer

A) It lends money to people in localities not served by chartered banks. 
B) It keeps the money supply from drying up during economic panics. 
C) It provides mortgage money for the poor. 
D) It lends money to developing nations whose own central banks have failed. 
A) It lends money to people in localities not served by chartered banks. 
B) It keeps the money supply from drying up during economic panics. 
C) It provides mortgage money for the poor. 
D) It lends money to developing nations whose own central banks have failed.

Question 11

What is the relationship between inflation and a situation where the velocity of money (V)and real output (Q)were increasing at approximately the same rate?

Accepted Answer

A) The expansion of money will lead to deflation. 
B) It would be impossible for monetary authorities to control inflation. 
C) Monetary acceleration would not lead to inflation. 
D) Inflation would be closely related to the long-run rate of monetary expansion. 
A) The expansion of money will lead to deflation. 
B) It would be impossible for monetary authorities to control inflation. 
C) Monetary acceleration would not lead to inflation. 
D) Inflation would be closely related to the long-run rate of monetary expansion.

Question 12

If policies of the Bank of Canada cause the money supply to increase and velocity is held constant,what is the expected outcome?

Accepted Answer

A) P × Q would decrease, and the general price level would decrease if Q remained constant. 
B) P × Q would increase, and the general price level would increase if Q remained constant. 
C) P × Q would decrease, and the general price level would increase if Q increased. 
D) P × Q would increase, and the general price level would increase if Q increased. 
A) P × Q would decrease, and the general price level would decrease if Q remained constant. 
B) P × Q would increase, and the general price level would increase if Q remained constant. 
C) P × Q would decrease, and the general price level would increase if Q increased. 
D) P × Q would increase, and the general price level would increase if Q increased.

Question 13

What does P x Q represent in the equation of exchange?

Accepted Answer

A) the dollar value of all final goods and services sold in a country in a given year 
B) the price index times nominal GDP 
C) real GDP 
D) the dollar value of all goods and services sold in a country in a given year 
A) the dollar value of all final goods and services sold in a country in a given year 
B) the price index times nominal GDP 
C) real GDP 
D) the dollar value of all goods and services sold in a country in a given year

Question 14

Which of the following best describes the velocity of money?

Accepted Answer

A) The velocity of money is not constant over time. 
B) The velocity of money is the same for every country so the Bank of Canada does not have to calculate its value. 
C) If individuals are hoarding their money, the velocity of money will be high. 
D) Control over the velocity of money implies that the Bank of Canada has precise control over real GDP. 
A) The velocity of money is not constant over time. 
B) The velocity of money is the same for every country so the Bank of Canada does not have to calculate its value. 
C) If individuals are hoarding their money, the velocity of money will be high. 
D) Control over the velocity of money implies that the Bank of Canada has precise control over real GDP.

Question 15

In the equation of exchange,when will velocity tend to rise?

Accepted Answer

A) when the price level falls, other things being equal 
B) when the nominal GDP falls, other things being equal 
C) when the money supply rises, other things being equal 
D) when real GDP rises, other things being equal 
A) when the price level falls, other things being equal 
B) when the nominal GDP falls, other things being equal 
C) when the money supply rises, other things being equal 
D) when real GDP rises, other things being equal

Question 16

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

Accepted Answer

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

Question 17

What effect would a combination of an open market purchase by the Bank of Canada and an increase in the bank rate have on the money supply?

Accepted Answer

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

Question 18

When the Bank of Canada purchases government securities from a chartered bank,what is the impact on that bank?

Accepted Answer

A) It loses equity. 
B) It automatically becomes poorer. 
C) It receives reserves that can be used to make additional loans. 
D) It loses its ability to make loans. 
A) It loses equity. 
B) It automatically becomes poorer. 
C) It receives reserves that can be used to make additional loans. 
D) It loses its ability to make loans.

Question 19

What effect would a combination of an open market sale by the Bank of Canada and an increase in the bank rate have on the money supply?

Accepted Answer

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

Question 20

How would the Bank of Canada use open market operations and the bank rate to increase the money supply?

Accepted Answer

A) It would sell bonds and increase the bank rate. 
B) It would buy bonds and reduce the bank rate. 
C) It would buy bonds and increase the bank rate. 
D) It would sell bonds and reduce the bank rate. 
A) It would sell bonds and increase the bank rate. 
B) It would buy bonds and reduce the bank rate. 
C) It would buy bonds and increase the bank rate. 
D) It would sell bonds and reduce the bank rate.

If nominal GDP is $1200 billion and M2 is $150 billion,what is velocity?

If the velocity of money increases from 5 percent and real GDP increases 3 percent,what will the Bank of Canada need to do keep prices the same?

The equation of exchange is most useful when we try to assess the impact of change in the stock markets on the aggregate economy.

What action by the Bank of Canada is likely to lead to a decrease in the money supply?

In Canada,monetary policy is the responsibility of the Bank of Canada.

When the Bank of Canada buys a Canadian government bond,what impact does this have on the volume of loans issued by the banking system and investment?

Which of the following is NOT an objective of the Bank of Canada?

Velocity represents the average number of times that a dollar is used in purchasing final goods and services in a one-year period.

Which of the following would occur if the money supply (M)and the price level (P)were increasing at approximately the same rate?

Which of the following best describes the role of the Bank of Canada as the lender of last resort?

What is the relationship between inflation and a situation where the velocity of money (V)and real output (Q)were increasing at approximately the same rate?

If policies of the Bank of Canada cause the money supply to increase and velocity is held constant,what is the expected outcome?

What does P x Q represent in the equation of exchange?

Which of the following best describes the velocity of money?

In the equation of exchange,when will velocity tend to rise?

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

What effect would a combination of an open market purchase by the Bank of Canada and an increase in the bank rate have on the money supply?

When the Bank of Canada purchases government securities from a chartered bank,what is the impact on that bank?

What effect would a combination of an open market sale by the Bank of Canada and an increase in the bank rate have on the money supply?

How would the Bank of Canada use open market operations and the bank rate to increase 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

Exam 12: The Bank of Canada

If nominal GDP is $1200 billion and M2 is $150 billion,what is velocity?

If the velocity of money increases from 5 percent and real GDP increases 3 percent,what will the Bank of Canada need to do keep prices the same?

The equation of exchange is most useful when we try to assess the impact of change in the stock markets on the aggregate economy.

What action by the Bank of Canada is likely to lead to a decrease in the money supply?

In Canada,monetary policy is the responsibility of the Bank of Canada.

When the Bank of Canada buys a Canadian government bond,what impact does this have on the volume of loans issued by the banking system and investment?

Which of the following is NOT an objective of the Bank of Canada?

Velocity represents the average number of times that a dollar is used in purchasing final goods and services in a one-year period.

Which of the following would occur if the money supply (M)and the price level (P)were increasing at approximately the same rate?

Which of the following best describes the role of the Bank of Canada as the lender of last resort?

What is the relationship between inflation and a situation where the velocity of money (V)and real output (Q)were increasing at approximately the same rate?

If policies of the Bank of Canada cause the money supply to increase and velocity is held constant,what is the expected outcome?

What does P x Q represent in the equation of exchange?

Which of the following best describes the velocity of money?

In the equation of exchange,when will velocity tend to rise?

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

What effect would a combination of an open market purchase by the Bank of Canada and an increase in the bank rate have on the money supply?

When the Bank of Canada purchases government securities from a chartered bank,what is the impact on that bank?

What effect would a combination of an open market sale by the Bank of Canada and an increase in the bank rate have on the money supply?

How would the Bank of Canada use open market operations and the bank rate to increase 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