Question 1

Which of the following has never been a goal of the Bank of Canada?

Accepted Answer

A) Viable balance of trade. 
B) Full employment. 
C) Stable prices. 
D) Balanced budget. 
A) Viable balance of trade. 
B) Full employment. 
C) Stable prices. 
D) Balanced budget.

Question 2

What results if the quantity of money demanded exceeds the quantity supplied?

Accepted Answer

A) The supply-of-money curve will shift to the left. 
B) The demand-for-money curve will shift to the right. 
C) The demand-for-money curve will shift to the left. 
D) The rate of interest will fall. 
E) The rate of interest will increase. 
A) The supply-of-money curve will shift to the left. 
B) The demand-for-money curve will shift to the right. 
C) The demand-for-money curve will shift to the left. 
D) The rate of interest will fall. 
E) The rate of interest will increase.

Question 3

Which of the following is one of the important routine functions of the Bank of Canada?

Accepted Answer

A) To help new commercial banks sell securities. 
B) To supply the economy with currency. 
C) To advise commercial banks as to the most profitable ways of reinvesting profits. 
D) To help commercial banks establish good financial arrangements with foreign banks. 
E) All of these. 
A) To help new commercial banks sell securities. 
B) To supply the economy with currency. 
C) To advise commercial banks as to the most profitable ways of reinvesting profits. 
D) To help commercial banks establish good financial arrangements with foreign banks. 
E) All of these.

Question 4

-What is the relationship between the price of government bonds and the rate of return received by bond-holders?

Accepted Answer

A) They are directly related. 
B) They are inversely related. 
C) They are unrelated. 
D) They are independent of Bank of Canada open-market operations. 
E) They are both dependent on the level of investment. 
A) They are directly related. 
B) They are inversely related. 
C) They are unrelated. 
D) They are independent of Bank of Canada open-market operations. 
E) They are both dependent on the level of investment.

Question 5

According to the Keynesian transmission process,which of the following will increase due to a decrease in the money supply?

Accepted Answer

A) Interest rates. 
B) The price level. 
C) Investment. 
D) Aggregate demand. 
A) Interest rates. 
B) The price level. 
C) Investment. 
D) Aggregate demand.

Question 6

What determines the supply of money?

Accepted Answer

A) The demand for money. 
B) The interest rate. 
C) The velocity of money. 
D) The level of nominal income. 
E) The Bank of Canada. 
A) The demand for money. 
B) The interest rate. 
C) The velocity of money. 
D) The level of nominal income. 
E) The Bank of Canada.

Question 7

If the quantity of money demanded exceeds the money supply,what will the interest rate do?

Accepted Answer

A) Rise,causing people to hold less money. 
B) Fall,causing people to hold less money. 
C) Rise,causing people to hold more money. 
D) Fall,causing people to hold more money. 
E) Remain unchanged,but the demand for money would decrease. 
A) Rise,causing people to hold less money. 
B) Fall,causing people to hold less money. 
C) Rise,causing people to hold more money. 
D) Fall,causing people to hold more money. 
E) Remain unchanged,but the demand for money would decrease.

Question 8

-Refer to the above graph above to answer this question.What will happen if the Bank of Canada increases the supply of money?

Accepted Answer

A) The MD3 curve would shift right and the equilibrium interest rate will rise. 
B) The MD3 curve would shift right and the equilibrium interest rate will fall. 
C) The MS curve would shift left and the equilibrium interest rate will fall. 
D) The MS curve would shift right and the equilibrium interest rate will fall. 
E) The MS curve would shift right and the equilibrium interest rate will rise. 
A) The MD3 curve would shift right and the equilibrium interest rate will rise. 
B) The MD3 curve would shift right and the equilibrium interest rate will fall. 
C) The MS curve would shift left and the equilibrium interest rate will fall. 
D) The MS curve would shift right and the equilibrium interest rate will fall. 
E) The MS curve would shift right and the equilibrium interest rate will rise.

Question 9

In Canada,who controls the supply of money?

Accepted Answer

A) The Department of Finance. 
B) The Bank of Canada. 
C) The market. 
D) The Canadian Mint. 
A) The Department of Finance. 
B) The Bank of Canada. 
C) The market. 
D) The Canadian Mint.

Question 10

How does the interest rate effect help explain why the aggregate demand curve is downward-sloping?

Accepted Answer

A) Because it suggests that a lower price level causes a higher interest rate and therefore a lower level of aggregate expenditures. 
B) Because it suggests that a lower interest rate causes a higher price level and therefore a lower level of aggregate expenditures. 
C) Because it suggests that a lower price level causes a lower interest rate and therefore a higher level of aggregate expenditures. 
D) Because it suggests that a lower interest rate causes a lower price level and therefore a higher level of aggregate expenditures. 
A) Because it suggests that a lower price level causes a higher interest rate and therefore a lower level of aggregate expenditures. 
B) Because it suggests that a lower interest rate causes a higher price level and therefore a lower level of aggregate expenditures. 
C) Because it suggests that a lower price level causes a lower interest rate and therefore a higher level of aggregate expenditures. 
D) Because it suggests that a lower interest rate causes a lower price level and therefore a higher level of aggregate expenditures.

Question 11

How and why is the asset demand for money related to the interest rate?

Accepted Answer

There is an inverse relationship between

Question 12

The interest rate is determined by savings and investment.

Accepted Answer

A) True 
 B)False

Question 13

A new one-year bond with a face value of $1,000 was issued that pays a coupon rate of 6%.What is the market interest rate if the price of the bond is
a)$1,029.15
b)$1,000
c)$972.5

Accepted Answer

The answer of A new one-year bond with a face...

Question 14

-Refer to the graph above to answer this question.Why is an interest rate of r1 untenable?

Accepted Answer

A) Because people will buy bonds to obtain more money thereby causing the interest rate to increase. 
B) Because people will buy bonds to obtain more money thereby causing the interest rate to fall. 
C) Because people will sell bonds to obtain more money thereby causing the interest rate to fall. 
D) Because people will sell bonds to obtain more money thereby causing the interest rate to increase. 
E) Because people will buy bonds to get rid of their excess money balances thereby causing the interest rate to increase. 
A) Because people will buy bonds to obtain more money thereby causing the interest rate to increase. 
B) Because people will buy bonds to obtain more money thereby causing the interest rate to fall. 
C) Because people will sell bonds to obtain more money thereby causing the interest rate to fall. 
D) Because people will sell bonds to obtain more money thereby causing the interest rate to increase. 
E) Because people will buy bonds to get rid of their excess money balances thereby causing the interest rate to increase.

Question 15

How can the federal government's debt be financed?

Accepted Answer

A) Only by the sale of bonds by the government to the central bank. 
B) Only by the sale of bonds by the government to the general public. 
C) By the sale of bonds by the government to the general public or to the central bank. 
D) By the sale of bonds by the government to the general public or by borrowing from chartered banks. 
E) Only by borrowing from chartered banks. 
A) Only by the sale of bonds by the government to the central bank. 
B) Only by the sale of bonds by the government to the general public. 
C) By the sale of bonds by the government to the general public or to the central bank. 
D) By the sale of bonds by the government to the general public or by borrowing from chartered banks. 
E) Only by borrowing from chartered banks.

Question 16

What is the effect of an increase in the money supply?

Accepted Answer

A) It causes the transactions demand curve to shift right. 
B) It causes the transactions demand curve to shift left. 
C) It causes a movement down the transactions demand curve. 
D) It causes a movement up the transactions demand curve. 
A) It causes the transactions demand curve to shift right. 
B) It causes the transactions demand curve to shift left. 
C) It causes a movement down the transactions demand curve. 
D) It causes a movement up the transactions demand curve.

Question 17

What would happen to the level of investment spending if the investment demand curve shifted to the right at the same time that the demand for money curve shifted to the right?

Accepted Answer

A) It would rise. 
B) It would fall. 
C) It would not change. 
D) It cannot be determined. 
A) It would rise. 
B) It would fall. 
C) It would not change. 
D) It cannot be determined.

Question 18

According to the Keynesian transmission process,what will be the effect of a decrease in the money supply?

Accepted Answer

A) An increase in the interest rate,an increase in investment spending,and an increase in GDP. 
B) An increase in the interest rate,an increase in investment spending,and a decrease in GDP. 
C) An increase in the interest rate,a decrease in investment spending,and a decrease in GDP. 
D) A decrease in the interest rate,an increase in investment spending,and an increase in GDP. 
E) A decrease in the interest rate,a decrease in investment spending,and a decrease in GDP. 
A) An increase in the interest rate,an increase in investment spending,and an increase in GDP. 
B) An increase in the interest rate,an increase in investment spending,and a decrease in GDP. 
C) An increase in the interest rate,a decrease in investment spending,and a decrease in GDP. 
D) A decrease in the interest rate,an increase in investment spending,and an increase in GDP. 
E) A decrease in the interest rate,a decrease in investment spending,and a decrease in GDP.

Question 19

Why is the asset demand for money curve downward-sloping?

Accepted Answer

A) As the interest rate increases,the opportunity cost of holding money also increases. 
B) As the interest rate increases,the opportunity cost of holding money decreases. 
C) As the interest rate increases,so too do bond prices. 
D) It becomes more attractive to hold money as the interest rate increases. 
E) As people hold larger quantities of money,the interest rate is forced down. 
A) As the interest rate increases,the opportunity cost of holding money also increases. 
B) As the interest rate increases,the opportunity cost of holding money decreases. 
C) As the interest rate increases,so too do bond prices. 
D) It becomes more attractive to hold money as the interest rate increases. 
E) As people hold larger quantities of money,the interest rate is forced down.

Question 20

What is the relationship between the economic policies of the Bank of Canada and those of the federal government?

Accepted Answer

A) They are always unrelated. 
B) They are identical. 
C) They are usually in conflict. 
D) They usually have similar goals concerning the direction to move the economy. 
E) They are both controlled by Parliament. 
A) They are always unrelated. 
B) They are identical. 
C) They are usually in conflict. 
D) They usually have similar goals concerning the direction to move the economy. 
E) They are both controlled by Parliament.

Which of the following has never been a goal of the Bank of Canada?

What results if the quantity of money demanded exceeds the quantity supplied?

Which of the following is one of the important routine functions of the Bank of Canada?

-What is the relationship between the price of government bonds and the rate of return received by bond-holders?

According to the Keynesian transmission process,which of the following will increase due to a decrease in the money supply?

What determines the supply of money?

If the quantity of money demanded exceeds the money supply,what will the interest rate do?

-Refer to the above graph above to answer this question.What will happen if the Bank of Canada increases the supply of money?

In Canada,who controls the supply of money?

How does the interest rate effect help explain why the aggregate demand curve is downward-sloping?

How and why is the asset demand for money related to the interest rate?

The interest rate is determined by savings and investment.

A new one-year bond with a face value of $1,000 was issued that pays a coupon rate of 6%.What is the market interest rate if the price of the bond is a)$1,029.15 b)$1,000 c)$972.5

-Refer to the graph above to answer this question.Why is an interest rate of r₁ untenable?

How can the federal government's debt be financed?

What is the effect of an increase in the money supply?

What would happen to the level of investment spending if the investment demand curve shifted to the right at the same time that the demand for money curve shifted to the right?

According to the Keynesian transmission process,what will be the effect of a decrease in the money supply?

Why is the asset demand for money curve downward-sloping?

What is the relationship between the economic policies of the Bank of Canada and those of the federal government?

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

Which of the following has never been a goal of the Bank of Canada?

What results if the quantity of money demanded exceeds the quantity supplied?

Which of the following is one of the important routine functions of the Bank of Canada?

-What is the relationship between the price of government bonds and the rate of return received by bond-holders?

According to the Keynesian transmission process,which of the following will increase due to a decrease in the money supply?

What determines the supply of money?

If the quantity of money demanded exceeds the money supply,what will the interest rate do?

-Refer to the above graph above to answer this question.What will happen if the Bank of Canada increases the supply of money?

In Canada,who controls the supply of money?

How does the interest rate effect help explain why the aggregate demand curve is downward-sloping?

How and why is the asset demand for money related to the interest rate?

The interest rate is determined by savings and investment.

A new one-year bond with a face value of $1,000 was issued that pays a coupon rate of 6%.What is the market interest rate if the price of the bond is a)$1,029.15 b)$1,000 c)$972.5

-Refer to the graph above to answer this question.Why is an interest rate of r1 untenable?

How can the federal government's debt be financed?

What is the effect of an increase in the money supply?

What would happen to the level of investment spending if the investment demand curve shifted to the right at the same time that the demand for money curve shifted to the right?

According to the Keynesian transmission process,what will be the effect of a decrease in the money supply?

Why is the asset demand for money curve downward-sloping?

What is the relationship between the economic policies of the Bank of Canada and those of the federal government?

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

-Refer to the graph above to answer this question.Why is an interest rate of r₁ untenable?