Question 1

What is the bank rate?

Accepted Answer

A) The rate of interest that the Bank of Canada charges a commercial bank for a loan. 
B) The rate of interest that a commercial bank charges its best customers for a loan. 
C) The rate of interest that a commercial bank pays its best customers for their savings. 
D) The rate of interest that the Bank of Canada pays commercial banks for their deposits. 
A) The rate of interest that the Bank of Canada charges a commercial bank for a loan. 
B) The rate of interest that a commercial bank charges its best customers for a loan. 
C) The rate of interest that a commercial bank pays its best customers for their savings. 
D) The rate of interest that the Bank of Canada pays commercial banks for their deposits.

Question 2

Below is some data concerning the money market?
  
-Refer to the information above to answer this question.If the supply of money is $130,what is the value of the equilibrium interest rate?

Accepted Answer

A) 8%. 
B) 7%. 
C) 6%. 
D) 5%. 
E) 4%. 
A) 8%. 
B) 7%. 
C) 6%. 
D) 5%. 
E) 4%.

Question 3

What does the Keynesian transmission process involve?

Accepted Answer

A) Money demand,the exchange rate,investment and GDP. 
B) Money supply,the interest rate,investment and GDP. 
C) The interest rate,GDP and the asset demand for money. 
D) Only the interest rate and GDP. 
E) Only the level of investment and GDP. 
A) Money demand,the exchange rate,investment and GDP. 
B) Money supply,the interest rate,investment and GDP. 
C) The interest rate,GDP and the asset demand for money. 
D) Only the interest rate and GDP. 
E) Only the level of investment and GDP.

Question 4

-Refer to the graph above to answer this question.What is the equilibrium interest rate?

Accepted Answer

A) r1. 
B) r2. 
C) r3. 
D) It cannot be determined from the information. 
A) r1. 
B) r2. 
C) r3. 
D) It cannot be determined from the information.

Question 5

Assume that the demand for money equals the supply of money of $80 billion and that the nominal GDP is $400 billion.According to the monetarist view,by how much will an increase in the money supply of $5 billion increase the nominal GDP?

Accepted Answer

A) By $30 billion. 
B) By $25 billion. 
C) By $20 billion. 
D) By $10 billion. 
E) By zero. 
A) By $30 billion. 
B) By $25 billion. 
C) By $20 billion. 
D) By $10 billion. 
E) By zero.

Question 6

Assume that people hold money when the interest rate is low so they can purchase bonds at a lower price if the interest rate increases.According to Keynes,what is this called?

Accepted Answer

A) Asset demand for money. 
B) Transactions demand for money. 
C) Speculative demand for money. 
D) Precautionary demand for money. 
E) Risk sharing. 
A) Asset demand for money. 
B) Transactions demand for money. 
C) Speculative demand for money. 
D) Precautionary demand for money. 
E) Risk sharing.

Question 7

What are the two determinants of the transactions demand for money?

Accepted Answer

The two major determinants of the transa

Question 8

Which of the following statements is correct?

Accepted Answer

A) An increase in prices will shift the transactions demand curve for money to the right but leave the total money demand curve unchanged. 
B) A decrease in prices will shift both the transactions demand and the total money demand curves to the left. 
C) A fall in real GDP will shift both the transactions demand and the total money demand curve to the right. 
D) A decline in real GDP will shift the transactions demand curve to the left but leave the total money demand curve unchanged. 
E) A fall in the rate of interest will shift both the asset demand and the total demand curves to the right. 
A) An increase in prices will shift the transactions demand curve for money to the right but leave the total money demand curve unchanged. 
B) A decrease in prices will shift both the transactions demand and the total money demand curves to the left. 
C) A fall in real GDP will shift both the transactions demand and the total money demand curve to the right. 
D) A decline in real GDP will shift the transactions demand curve to the left but leave the total money demand curve unchanged. 
E) A fall in the rate of interest will shift both the asset demand and the total demand curves to the right.

Question 9

All of the following except one are functions of the Bank of Canada.Which is the exception?

Accepted Answer

A) It is the sole issuer of currency. 
B) It ensures that the commercial banks remain profitable. 
C) It is auditor and inspector of the commercial banks. 
D) It is the regulator of the money supply. 
A) It is the sole issuer of currency. 
B) It ensures that the commercial banks remain profitable. 
C) It is auditor and inspector of the commercial banks. 
D) It is the regulator of the money supply.

Question 10

An example of quantitative easing is when:

Accepted Answer

A) central banks purchase financial assets with longer maturities which in turn causes interest rates to fall and Real GDP to increase. 
B) central banks purchase financial assets with short maturities which in turn causes interest rates to fall and Real GDP to decrease. 
C) commercial banks purchase financial assets with longer maturities which in turn causes interest rates to rise and Real GDP to increase. 
D) central banks purchase financial assets with short maturities which in turn causes interest rates to rise and Real GDP to rise. 
A) central banks purchase financial assets with longer maturities which in turn causes interest rates to fall and Real GDP to increase. 
B) central banks purchase financial assets with short maturities which in turn causes interest rates to fall and Real GDP to decrease. 
C) commercial banks purchase financial assets with longer maturities which in turn causes interest rates to rise and Real GDP to increase. 
D) central banks purchase financial assets with short maturities which in turn causes interest rates to rise and Real GDP to rise.

Question 11

The quantity of asset demand for money that people wish to hold increases as the rate of interest falls.

Accepted Answer

A) True 
 B)False

Question 12

What is the Bank of Canada?

Accepted Answer

A) A state-owned central bank,whose basic goal is to provide income for the Government of Canada. 
B) A privately-owned central bank,whose basic goal is to earn profits for its owners. 
C) A state-owned central bank,whose basic goal is to control the money supply and thereby help to promote general economic welfare. 
D) A privately-owned central bank,whose basic function is to minimize the risk for commercial banks in order to make them reasonably secure and profitable. 
E) A privately-owned central bank,whose basic goal is to provide a market for Government of Canada securities. 
A) A state-owned central bank,whose basic goal is to provide income for the Government of Canada. 
B) A privately-owned central bank,whose basic goal is to earn profits for its owners. 
C) A state-owned central bank,whose basic goal is to control the money supply and thereby help to promote general economic welfare. 
D) A privately-owned central bank,whose basic function is to minimize the risk for commercial banks in order to make them reasonably secure and profitable. 
E) A privately-owned central bank,whose basic goal is to provide a market for Government of Canada securities.

Question 13

Write out the equation of exchange,and identify each term.

Accepted Answer

MV = PQ,where M is the money s

Question 14

-In the figure above,what does curve MD2 represent?

Accepted Answer

A) The asset demand for money. 
B) The transactions demand for money. 
C) The investment demand. 
D) The stock of money. 
E) The total demand for money. 
A) The asset demand for money. 
B) The transactions demand for money. 
C) The investment demand. 
D) The stock of money. 
E) The total demand for money.

Question 15

What is the price of money?

Accepted Answer

The interest rate is the price

Question 16

To which function of money is the transactions demand most closely related?

Accepted Answer

A) Unit of account. 
B) Medium of exchange. 
C) Store of wealth. 
D) Asset demand. 
A) Unit of account. 
B) Medium of exchange. 
C) Store of wealth. 
D) Asset demand.

Question 17

According to the equation of exchange,if V is constant,and the economy is at full employment,what would a 5 percent increase in the money supply do?

Accepted Answer

A) It will cause P to increase by less than 5%. 
B) It will cause P to increase by more than 5%. 
C) It will cause P to increase by 5%. 
D) It will cause P to decrease by 5%. 
E) It will not affect P. 
A) It will cause P to increase by less than 5%. 
B) It will cause P to increase by more than 5%. 
C) It will cause P to increase by 5%. 
D) It will cause P to decrease by 5%. 
E) It will not affect P.

Question 18

How is the equilibrium rate of interest in the money market determined?

Accepted Answer

A) By the intersection of the supply of money and the asset demand for money. 
B) By the intersection of the supply of money and the transactions demand for money. 
C) By the intersection of the supply of money and the total demand for money. 
D) By the intersection of aggregate expenditures and the total demand for money. 
A) By the intersection of the supply of money and the asset demand for money. 
B) By the intersection of the supply of money and the transactions demand for money. 
C) By the intersection of the supply of money and the total demand for money. 
D) By the intersection of aggregate expenditures and the total demand for money.

Question 19

An interest rate above equilibrium will lead to a surplus of money.

Accepted Answer

A) True 
 B)False

Question 20

Suppose that the rate of return for a particular bond is 8%.If $50 is the coupon interest and $975 is the price paid for the bond.What is the change in the bond price?

Accepted Answer

A) 0. 
B) +$8. 
C) +$28. 
D) +$50. 
E) +$80 
A) 0. 
B) +$8. 
C) +$28. 
D) +$50. 
E) +$80

What is the bank rate?

Below is some data concerning the money market? -Refer to the information above to answer this question.If the supply of money is $130,what is the value of the equilibrium interest rate?

What does the Keynesian transmission process involve?

-Refer to the graph above to answer this question.What is the equilibrium interest rate?

Assume that the demand for money equals the supply of money of $80 billion and that the nominal GDP is $400 billion.According to the monetarist view,by how much will an increase in the money supply of $5 billion increase the nominal GDP?

Assume that people hold money when the interest rate is low so they can purchase bonds at a lower price if the interest rate increases.According to Keynes,what is this called?

What are the two determinants of the transactions demand for money?

Which of the following statements is correct?

All of the following except one are functions of the Bank of Canada.Which is the exception?

An example of quantitative easing is when:

The quantity of asset demand for money that people wish to hold increases as the rate of interest falls.

What is the Bank of Canada?

Write out the equation of exchange,and identify each term.

-In the figure above,what does curve MD2 represent?

What is the price of money?

To which function of money is the transactions demand most closely related?

According to the equation of exchange,if V is constant,and the economy is at full employment,what would a 5 percent increase in the money supply do?

How is the equilibrium rate of interest in the money market determined?

An interest rate above equilibrium will lead to a surplus of money.

Suppose that the rate of return for a particular bond is 8%.If $50 is the coupon interest and $975 is the price paid for the bond.What is the change in the bond price?

The Economic Problem

Demand and Supply: an Introduction

Measuring the Economy 1: GDP and Economic Growth

Measuring the Economy 2: Unemployment and Inflation

Aggregate Demand and Supply

Aggregate Expenditures

Fiscal Policy

Money and Banking

International Trade

Exchange Rates and the Balance of Payments

Macroeconomic Policy Revisited

A Walk Through the Twentieth Century and Beyond

Filters

Exam 9: The Money Market and Monetary Policy

What is the bank rate?

Below is some data concerning the money market? -Refer to the information above to answer this question.If the supply of money is $130,what is the value of the equilibrium interest rate?

What does the Keynesian transmission process involve?

-Refer to the graph above to answer this question.What is the equilibrium interest rate?

Assume that the demand for money equals the supply of money of $80 billion and that the nominal GDP is $400 billion.According to the monetarist view,by how much will an increase in the money supply of $5 billion increase the nominal GDP?

Assume that people hold money when the interest rate is low so they can purchase bonds at a lower price if the interest rate increases.According to Keynes,what is this called?

What are the two determinants of the transactions demand for money?

Which of the following statements is correct?

All of the following except one are functions of the Bank of Canada.Which is the exception?

An example of quantitative easing is when:

The quantity of asset demand for money that people wish to hold increases as the rate of interest falls.

What is the Bank of Canada?

Write out the equation of exchange,and identify each term.

-In the figure above,what does curve MD2 represent?

What is the price of money?

To which function of money is the transactions demand most closely related?

According to the equation of exchange,if V is constant,and the economy is at full employment,what would a 5 percent increase in the money supply do?

How is the equilibrium rate of interest in the money market determined?

An interest rate above equilibrium will lead to a surplus of money.

Suppose that the rate of return for a particular bond is 8%.If $50 is the coupon interest and $975 is the price paid for the bond.What is the change in the bond price?

The Economic Problem

Demand and Supply: an Introduction

Measuring the Economy 1: GDP and Economic Growth

Measuring the Economy 2: Unemployment and Inflation

Aggregate Demand and Supply

Aggregate Expenditures

Fiscal Policy

Money and Banking

International Trade

Exchange Rates and the Balance of Payments

Macroeconomic Policy Revisited

A Walk Through the Twentieth Century and Beyond

Filters