Question 1

Which statement might explain why Canada has so much currency per person?

Accepted Answer

A)  Canadian citizens are holding a lot of foreign currency. 
B)  Currency may be a preferable store of wealth for criminals. 
C)  People use credit and debit cards more frequently. 
D)  Much of Canadian currency is held by foreigners. 
A)  Canadian citizens are holding a lot of foreign currency. 
B)  Currency may be a preferable store of wealth for criminals. 
C)  People use credit and debit cards more frequently. 
D)  Much of Canadian currency is held by foreigners.

Question 2

A bank has (in millions): $200 reserves,$800 loans,$400 securities,$1200 deposits,$100 debt,and $200 capital.How much is the bank's leverage ratio?

Accepted Answer

A)  0.07 
B)  0.17 
C)  7 
D)  14 
A)  0.07 
B)  0.17 
C)  7 
D)  14

Question 3

Economists argue that the move from barter to money increased trade and production.How is this possible?

Accepted Answer

The use of money allows people

Question 4

What is the approximate amount of currency per person in Canada?

Accepted Answer

A)  $558 
B)  $1025 
C)  $1674 
D)  $2457 
A)  $558 
B)  $1025 
C)  $1674 
D)  $2457

Question 5

Which organization plays the role of a central bank in Canada?

Accepted Answer

A)  TD Canada Trust 
B)  the Canadian Imperial Bank of Commerce 
C)  the Bank of Canada 
D)  the Royal Bank of Canada 
A)  TD Canada Trust 
B)  the Canadian Imperial Bank of Commerce 
C)  the Bank of Canada 
D)  the Royal Bank of Canada

Question 6

In a fractional reserve banking system with no excess reserves and no currency holdings,suppose the central bank buys $100 million of bonds.Which statement best describes the effects of this open-market operation?

Accepted Answer

A)  Reserves and the money supply increase by less than $100 million. 
B)  Reserves increase by $100 million,and the money supply increases by $100 million. 
C)  Reserves increase by $100 million,and the money supply increases by more than $100 million. 
D)  Both reserves and the money supply increase by more than $100 million. 
A)  Reserves and the money supply increase by less than $100 million. 
B)  Reserves increase by $100 million,and the money supply increases by $100 million. 
C)  Reserves increase by $100 million,and the money supply increases by more than $100 million. 
D)  Both reserves and the money supply increase by more than $100 million.

Question 7

If the reserve ratio is 20 percent,how much money can be created from $100 of reserves? Show your work.

Accepted Answer

(1 / 0.20)

Question 8

What is the function of debit cards?

Accepted Answer

A)  They defer payments. 
B)  They are equivalent to credit cards. 
C)  They are included in M2. 
D)  They are used as a method of payment. 
A)  They defer payments. 
B)  They are equivalent to credit cards. 
C)  They are included in M2. 
D)  They are used as a method of payment.

Question 9

In order for currency to be widely used as a medium of exchange,it is sufficient for the government to designate it as legal tender.

Accepted Answer

A) True 
 B)False

Question 10

Which statement best describes the outcome of an increase in the bank rate?

Accepted Answer

A)  Banks will borrow more from Bank of Canada,so reserves increase. 
B)  Banks will borrow more from Bank of Canada,so reserves decrease. 
C)  Banks will borrow less from Bank of Canada,so reserves increase. 
D)  Banks will borrow less from Bank of Canada,so reserves decrease. 
A)  Banks will borrow more from Bank of Canada,so reserves increase. 
B)  Banks will borrow more from Bank of Canada,so reserves decrease. 
C)  Banks will borrow less from Bank of Canada,so reserves increase. 
D)  Banks will borrow less from Bank of Canada,so reserves decrease.

Question 11

Which statement best explains whether bank runs are a problem for the economy?

Accepted Answer

A)  They are not a problem because bank runs will affect neither the money supply nor the money multiplier. 
B)  Bank runs are only a problem for insolvent banks. 
C)  They are a problem,but they can be neither prevented nor stopped by a central bank. 
D)  Bank runs are a problem because bank failures may spread to healthy banks. 
A)  They are not a problem because bank runs will affect neither the money supply nor the money multiplier. 
B)  Bank runs are only a problem for insolvent banks. 
C)  They are a problem,but they can be neither prevented nor stopped by a central bank. 
D)  Bank runs are a problem because bank failures may spread to healthy banks.

Question 12

Suppose an economy has no money,and people use gold for all payments.
a.Discuss the effects of economic growth (an increase in the amount of goods and services that the economy produces)on prices.
b.What happens to prices when more gold becomes available,say due to new openings of gold mines?
c.Who determines the economy's money supply?
d Discuss the advantages and disadvantages of such a "gold standard" economy.

Accepted Answer

a.If the amount of goods and services av

Question 13

What does the text mean by,and how does it answer the question,"Where is all the currency?"

Accepted Answer

The amount of currency per person is abo

Question 14

When a bank loans out $1000,what happens to the money supply in the long term?

Accepted Answer

A)  It increases by $1000. 
B)  It decreases by $1000. 
C)  It increases by more than $1000. 
D)  It decreases by more than $1000. 
A)  It increases by $1000. 
B)  It decreases by $1000. 
C)  It increases by more than $1000. 
D)  It decreases by more than $1000.

Question 15

In the nineteenth century,when there were often bank runs caused by crop failures,banks would make relatively fewer loans and hold relatively more excess reserves.By itself,which action should the banks have taken?

Accepted Answer

A)  They should have increased both the money multiplier and the money supply. 
B)  They should have decreased the money multiplier and increased the money supply. 
C)  They should have increased the money multiplier and decreased the money supply. 
D)  They should have decreased both the money multiplier and the money supply. 
A)  They should have increased both the money multiplier and the money supply. 
B)  They should have decreased the money multiplier and increased the money supply. 
C)  They should have increased the money multiplier and decreased the money supply. 
D)  They should have decreased both the money multiplier and the money supply.

Question 16

Which statement best describes the process of open-market sales conducted by the Bank of Canada?

Accepted Answer

A)  The Bank of Canada sells Treasury bills,which increases the money supply. 
B)  The Bank of Canada sells Treasury bills,which decreases the money supply. 
C)  The Bank of Canada borrows from member banks,which increases the money supply. 
D)  The Bank of Canada lends money to member banks,which decreases the money supply. 
A)  The Bank of Canada sells Treasury bills,which increases the money supply. 
B)  The Bank of Canada sells Treasury bills,which decreases the money supply. 
C)  The Bank of Canada borrows from member banks,which increases the money supply. 
D)  The Bank of Canada lends money to member banks,which decreases the money supply.

Question 17

If you deposit $5000 into First Hawkeye Bank,what will the bank most likely do?

Accepted Answer

A)  It will eventually increase its required reserves by the reserve ratio times $5000. 
B)  It will be able to lend out $5000 times the reserve ratio. 
C)  It will initially see reserves increase by $5000 divided by the reserve ratio. 
D)  It will be able to lend out $5000. 
A)  It will eventually increase its required reserves by the reserve ratio times $5000. 
B)  It will be able to lend out $5000 times the reserve ratio. 
C)  It will initially see reserves increase by $5000 divided by the reserve ratio. 
D)  It will be able to lend out $5000.

Question 18

How may the Bank of Canada influence the price level?

Accepted Answer

A)  by conducting open-market sales and raising the bank rate 
B)  by conducting open-market sales and lowering the bank rate 
C)  by conducting open-market purchases and raising the bank rate 
D)  by conducting open-market purchases and lowering the bank rate 
A)  by conducting open-market sales and raising the bank rate 
B)  by conducting open-market sales and lowering the bank rate 
C)  by conducting open-market purchases and raising the bank rate 
D)  by conducting open-market purchases and lowering the bank rate

Question 19

Table 10-4
The following information pertains to the Bank of Moncton.  
-Refer to the Table 10-4.If the Bank of Canada requires a reserve ratio of 4 percent,how much in excess reserves does the Bank of Moncton now hold?

Accepted Answer

A)  $1200 
B)  $1400 
C)  $2880 
D)  $3000 
A)  $1200 
B)  $1400 
C)  $2880 
D)  $3000

Question 20

Table 10-4
The following information pertains to the Bank of Moncton.  
-Refer to the Table 10-4.If the Bank of Moncton has lent out all the money it can,then what is its reserve ratio?

Accepted Answer

A)  1 percent 
B)  5 percent 
C)  10 percent 
D)  15 percent 
A)  1 percent 
B)  5 percent 
C)  10 percent 
D)  15 percent

Which statement might explain why Canada has so much currency per person?

A bank has (in millions): $200 reserves,$800 loans,$400 securities,$1200 deposits,$100 debt,and $200 capital.How much is the bank's leverage ratio?

Economists argue that the move from barter to money increased trade and production.How is this possible?

What is the approximate amount of currency per person in Canada?

Which organization plays the role of a central bank in Canada?

In a fractional reserve banking system with no excess reserves and no currency holdings,suppose the central bank buys $100 million of bonds.Which statement best describes the effects of this open-market operation?

If the reserve ratio is 20 percent,how much money can be created from $100 of reserves? Show your work.

What is the function of debit cards?

In order for currency to be widely used as a medium of exchange,it is sufficient for the government to designate it as legal tender.

Which statement best describes the outcome of an increase in the bank rate?

Which statement best explains whether bank runs are a problem for the economy?

What does the text mean by,and how does it answer the question,"Where is all the currency?"

When a bank loans out $1000,what happens to the money supply in the long term?

In the nineteenth century,when there were often bank runs caused by crop failures,banks would make relatively fewer loans and hold relatively more excess reserves.By itself,which action should the banks have taken?

Which statement best describes the process of open-market sales conducted by the Bank of Canada?

If you deposit $5000 into First Hawkeye Bank,what will the bank most likely do?

How may the Bank of Canada influence the price level?

Table 10-4 The following information pertains to the Bank of Moncton. -Refer to the Table 10-4.If the Bank of Canada requires a reserve ratio of 4 percent,how much in excess reserves does the Bank of Moncton now hold?

Table 10-4 The following information pertains to the Bank of Moncton. -Refer to the Table 10-4.If the Bank of Moncton has lent out all the money it can,then what is its reserve ratio?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

Unemployment and Its Natural Rate

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 10: The Monetary System

Which statement might explain why Canada has so much currency per person?

A bank has (in millions): $200 reserves,$800 loans,$400 securities,$1200 deposits,$100 debt,and $200 capital.How much is the bank's leverage ratio?

Economists argue that the move from barter to money increased trade and production.How is this possible?

What is the approximate amount of currency per person in Canada?

Which organization plays the role of a central bank in Canada?

In a fractional reserve banking system with no excess reserves and no currency holdings,suppose the central bank buys $100 million of bonds.Which statement best describes the effects of this open-market operation?

If the reserve ratio is 20 percent,how much money can be created from $100 of reserves? Show your work.

What is the function of debit cards?

In order for currency to be widely used as a medium of exchange,it is sufficient for the government to designate it as legal tender.

Which statement best describes the outcome of an increase in the bank rate?

Which statement best explains whether bank runs are a problem for the economy?

What does the text mean by,and how does it answer the question,"Where is all the currency?"

When a bank loans out $1000,what happens to the money supply in the long term?

In the nineteenth century,when there were often bank runs caused by crop failures,banks would make relatively fewer loans and hold relatively more excess reserves.By itself,which action should the banks have taken?

Which statement best describes the process of open-market sales conducted by the Bank of Canada?

If you deposit $5000 into First Hawkeye Bank,what will the bank most likely do?

How may the Bank of Canada influence the price level?

Table 10-4 The following information pertains to the Bank of Moncton. -Refer to the Table 10-4.If the Bank of Canada requires a reserve ratio of 4 percent,how much in excess reserves does the Bank of Moncton now hold?

Table 10-4 The following information pertains to the Bank of Moncton. -Refer to the Table 10-4.If the Bank of Moncton has lent out all the money it can,then what is its reserve ratio?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

Unemployment and Its Natural Rate

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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