Question 1

If a reduction in the money supply were desired to slow inflation,what action might the Bank of Canada take?

Accepted Answer

A) decrease the bank rate 
B) raise the bank rate 
C) lower tax rates 
D) buy government bonds on the open market 
A) decrease the bank rate 
B) raise the bank rate 
C) lower tax rates 
D) buy government bonds on the open market

Question 2

Which of the following interest rates will an expansionary monetary policy have its greatest direct effect on?

Accepted Answer

A) home mortgage 
B) long-term business loans 
C) ten-year bond 
D) the bank rate 
A) home mortgage 
B) long-term business loans 
C) ten-year bond 
D) the bank rate

Question 3

When the economy is experiencing an inflationary gap,how can monetary policy affect real output and the price level?

Accepted Answer

A) An expansionary monetary policy can result in increased real output and an increased price level. 
B) An expansionary monetary policy can result in increased real output and a lower price level. 
C) An expansionary monetary policy can result in decreased real output and an increased price level. 
D) An expansionary monetary policy can result in decreased real output and a lower price level. 
A) An expansionary monetary policy can result in increased real output and an increased price level. 
B) An expansionary monetary policy can result in increased real output and a lower price level. 
C) An expansionary monetary policy can result in decreased real output and an increased price level. 
D) An expansionary monetary policy can result in decreased real output and a lower price level.

Question 4

What will happen to the demand for money if real GDP rises?

Accepted Answer

A) It depends on what happens to interest rates. 
B) It will be unchanged. 
C) It will decrease. 
D) It will increase. 
A) It depends on what happens to interest rates. 
B) It will be unchanged. 
C) It will decrease. 
D) It will increase.

Question 5

If interest rates rise,what will happen to demand for money?

Accepted Answer

A) It will decrease; people want to avoid inflationary losses. 
B) Nothing; the money market can sustain long periods of disequilibrium. 
C) It will increase. 
D) Nothing; the economy will move to a new quantity demanded at a new interest rate. 
A) It will decrease; people want to avoid inflationary losses. 
B) Nothing; the money market can sustain long periods of disequilibrium. 
C) It will increase. 
D) Nothing; the economy will move to a new quantity demanded at a new interest rate.

Question 6

If the Bank of Canada sells government securities from the chartered banks when the SRAS is relatively steep,what should we expect to happen to interest rates and real GDP?

Accepted Answer

A) Interest rates will rise and real GDP will fall a little. 
B) Interest rates will fall and real GDP will rise a little. 
C) Interest rates will fall and real GDP will rise substantially. 
D) Interest rates will rise and real GDP will fall substantially. 
A) Interest rates will rise and real GDP will fall a little. 
B) Interest rates will fall and real GDP will rise a little. 
C) Interest rates will fall and real GDP will rise substantially. 
D) Interest rates will rise and real GDP will fall substantially.

Question 7

What does the slope of the Phillips curve indicate?

Accepted Answer

A) that the opportunity cost of decreasing unemployment increases as unemployment decreases 
B) that the opportunity cost of decreasing unemployment decreases as unemployment increases 
C) that the opportunity cost of decreasing inflation decreases as inflation decreases 
D) that the opportunity cost of decreasing inflation or unemployment is constant 
A) that the opportunity cost of decreasing unemployment increases as unemployment decreases 
B) that the opportunity cost of decreasing unemployment decreases as unemployment increases 
C) that the opportunity cost of decreasing inflation decreases as inflation decreases 
D) that the opportunity cost of decreasing inflation or unemployment is constant

Question 8

How do income and interest rates affect the quantity of money that households and businesses will demand?

Accepted Answer

A) Demand increases if income rises but decreases if interest rates rise. 
B) Demand increases if income rises and increases if interest rates rise. 
C) Demand decreases if income rises but increases if interest rates rise. 
D) Demand decreases if income rises and decreases if interest rates rise. 
A) Demand increases if income rises but decreases if interest rates rise. 
B) Demand increases if income rises and increases if interest rates rise. 
C) Demand decreases if income rises but increases if interest rates rise. 
D) Demand decreases if income rises and decreases if interest rates rise.

Question 9

When the economy is in a recession,how can monetary policy affect real output?

Accepted Answer

A) An expansionary monetary policy can potentially result in increased real output in both the short run and long run. 
B) A contractionary monetary policy can potentially result in increased real output in both the short run and long run. 
C) A contractionary monetary policy can potentially result in increased real output, but only in the short run. 
D) An expansionary monetary policy can potentially result in increased real output, but only in the short run. 
A) An expansionary monetary policy can potentially result in increased real output in both the short run and long run. 
B) A contractionary monetary policy can potentially result in increased real output in both the short run and long run. 
C) A contractionary monetary policy can potentially result in increased real output, but only in the short run. 
D) An expansionary monetary policy can potentially result in increased real output, but only in the short run.

Question 10

Assume the Bank of Canada sells $1000 worth of government bonds to Paul,who deposits the money in the First National Bank.If the desired reserve ratio is 25 percent,what effect will this transaction have?

Accepted Answer

A) It will decrease the excess reserves of the Trust National Bank by $750, and eventually decrease the money supply by $4000. 
B) It will decrease the excess reserves of the Trust National Bank by $1000, and eventually decrease the money supply by $4000. 
C) It will decrease the excess reserves of the Trust National Bank by $1000, and eventually decrease the money supply by $1000. 
D) It will decrease the excess reserves of the Trust National Bank by $750, and eventually decrease the money supply by $1000. 
A) It will decrease the excess reserves of the Trust National Bank by $750, and eventually decrease the money supply by $4000. 
B) It will decrease the excess reserves of the Trust National Bank by $1000, and eventually decrease the money supply by $4000. 
C) It will decrease the excess reserves of the Trust National Bank by $1000, and eventually decrease the money supply by $1000. 
D) It will decrease the excess reserves of the Trust National Bank by $750, and eventually decrease the money supply by $1000.

Question 11

You have the assignment of making a recommendation to the governor of the Bank of Canada during a period of persistent,high inflation.What could you do to restore stable prices?

Accepted Answer

In order to restore price stab

Question 12

A one-percentage-point change in the desired reserve ratio would change the money supply by roughly one percent,other things being equal.

Accepted Answer

A) True 
 B)False

Question 13

The Phillips curve shows that there is a negative relationship between the unemployment rate and real output.

Accepted Answer

A) True 
 B)False

Question 14

What is the impact on real interest rates and investment spending when the money supply decreases,other things being equal?

Accepted Answer

A) real interest rates fall, and investment spending rises 
B) real interest rates fall, and investment spending falls 
C) real interest rates rise, and investment spending rises 
D) real interest rates rise, and investment spending falls 
A) real interest rates fall, and investment spending rises 
B) real interest rates fall, and investment spending falls 
C) real interest rates rise, and investment spending rises 
D) real interest rates rise, and investment spending falls

Question 15

What affects the demand for money?

Accepted Answer

People have three basic motives for hold

Question 16

Which of the following statements comparing fiscal policy with monetary policy as a means of attaining macroeconomic goals is the most accurate?

Accepted Answer

A) The effects of monetary and fiscal policy are both immediate. 
B) The effects of monetary policy are certain and predictable, while the effects of fiscal policy are not. 
C) The implementation of monetary policy is not slowed down by the same budgetary process as fiscal policy. 
D) It takes a long time for fiscal policy to have an effect on the economy, but the effects of monetary policy are immediate. 
A) The effects of monetary and fiscal policy are both immediate. 
B) The effects of monetary policy are certain and predictable, while the effects of fiscal policy are not. 
C) The implementation of monetary policy is not slowed down by the same budgetary process as fiscal policy. 
D) It takes a long time for fiscal policy to have an effect on the economy, but the effects of monetary policy are immediate.

Question 17

Under what circumstances will employment be affected by inflation?

Accepted Answer

A) only if the inflation rate gets above a certain level 
B) only if the inflation rate is different from what was expected 
C) only if the inflation is expected 
D) only if unemployment is above the natural rate 
A) only if the inflation rate gets above a certain level 
B) only if the inflation rate is different from what was expected 
C) only if the inflation is expected 
D) only if unemployment is above the natural rate

Question 18

If,in a bid to get re-elected,politicians decide to decrease taxes when there is an inflationary gap,what action might the Bank of Canada decide to take?

Accepted Answer

A) increase the money supply 
B) sell government securities to the chartered banks 
C) buy government securities from the general public 
D) reduce the bank rate 
A) increase the money supply 
B) sell government securities to the chartered banks 
C) buy government securities from the general public 
D) reduce the bank rate

Question 19

Which of the following would tend to reduce the price level?

Accepted Answer

A) a chartered bank using excess reserves to extend a loan to a customer 
B) an decrease in the bank rate 
C) a chartered bank purchasing government securities from an individual as an investment 
D) the bank of Canada selling bonds on the open market 
A) a chartered bank using excess reserves to extend a loan to a customer 
B) an decrease in the bank rate 
C) a chartered bank purchasing government securities from an individual as an investment 
D) the bank of Canada selling bonds on the open market

Question 20

How will an expansionary monetary policy affect the GDP when the economy is at less than full employment? At full employment?

Accepted Answer

Expansionary monetary policy at less tha

If a reduction in the money supply were desired to slow inflation,what action might the Bank of Canada take?

Which of the following interest rates will an expansionary monetary policy have its greatest direct effect on?

When the economy is experiencing an inflationary gap,how can monetary policy affect real output and the price level?

What will happen to the demand for money if real GDP rises?

If interest rates rise,what will happen to demand for money?

If the Bank of Canada sells government securities from the chartered banks when the SRAS is relatively steep,what should we expect to happen to interest rates and real GDP?

What does the slope of the Phillips curve indicate?

How do income and interest rates affect the quantity of money that households and businesses will demand?

When the economy is in a recession,how can monetary policy affect real output?

Assume the Bank of Canada sells $1000 worth of government bonds to Paul,who deposits the money in the First National Bank.If the desired reserve ratio is 25 percent,what effect will this transaction have?

You have the assignment of making a recommendation to the governor of the Bank of Canada during a period of persistent,high inflation.What could you do to restore stable prices?

A one-percentage-point change in the desired reserve ratio would change the money supply by roughly one percent,other things being equal.

The Phillips curve shows that there is a negative relationship between the unemployment rate and real output.

What is the impact on real interest rates and investment spending when the money supply decreases,other things being equal?

What affects the demand for money?

Which of the following statements comparing fiscal policy with monetary policy as a means of attaining macroeconomic goals is the most accurate?

Under what circumstances will employment be affected by inflation?

If,in a bid to get re-elected,politicians decide to decrease taxes when there is an inflationary gap,what action might the Bank of Canada decide to take?

Which of the following would tend to reduce the price level?

How will an expansionary monetary policy affect the GDP when the economy is at less than full employment? At full employment?

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

The Bank of Canada

International Trade

International Finance

Filters

Exam 13: Monetary Policy

If a reduction in the money supply were desired to slow inflation,what action might the Bank of Canada take?

Which of the following interest rates will an expansionary monetary policy have its greatest direct effect on?

When the economy is experiencing an inflationary gap,how can monetary policy affect real output and the price level?

What will happen to the demand for money if real GDP rises?

If interest rates rise,what will happen to demand for money?

If the Bank of Canada sells government securities from the chartered banks when the SRAS is relatively steep,what should we expect to happen to interest rates and real GDP?

What does the slope of the Phillips curve indicate?

How do income and interest rates affect the quantity of money that households and businesses will demand?

When the economy is in a recession,how can monetary policy affect real output?

Assume the Bank of Canada sells $1000 worth of government bonds to Paul,who deposits the money in the First National Bank.If the desired reserve ratio is 25 percent,what effect will this transaction have?

You have the assignment of making a recommendation to the governor of the Bank of Canada during a period of persistent,high inflation.What could you do to restore stable prices?

A one-percentage-point change in the desired reserve ratio would change the money supply by roughly one percent,other things being equal.

The Phillips curve shows that there is a negative relationship between the unemployment rate and real output.

What is the impact on real interest rates and investment spending when the money supply decreases,other things being equal?

What affects the demand for money?

Which of the following statements comparing fiscal policy with monetary policy as a means of attaining macroeconomic goals is the most accurate?

Under what circumstances will employment be affected by inflation?

If,in a bid to get re-elected,politicians decide to decrease taxes when there is an inflationary gap,what action might the Bank of Canada decide to take?

Which of the following would tend to reduce the price level?

How will an expansionary monetary policy affect the GDP when the economy is at less than full employment? At full employment?

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

The Bank of Canada

International Trade

International Finance

Filters