Question 1

If Guy and Laraine both have chequing accounts at the same bank and Guy writes a cheque for $1,000,payable to Laraine,what will happen to the bank's accounts?

Accepted Answer

A) They will not be affected. 
B) Assets and liabilities will both decrease by $1,000. 
C) Liabilities will decline and the bank's equity will increase by $1,000. 
D) Reserves and demand deposits will both decrease by $1,000. 
E) Demand deposits will increase and loans to customers will decrease by $1,000. 
A) They will not be affected. 
B) Assets and liabilities will both decrease by $1,000. 
C) Liabilities will decline and the bank's equity will increase by $1,000. 
D) Reserves and demand deposits will both decrease by $1,000. 
E) Demand deposits will increase and loans to customers will decrease by $1,000.

Question 2

Below is a list of financial assets:
1.Certificates of deposit
2.Notice deposits (savings accounts)
3.Currency (coins and paper money)
4.Demand deposits (chequing accounts)
5.Government securities
6.Gold certificates
-Refer to the information above to answer this question.Which item(s)is included in the M3 definition of money?

Accepted Answer

A) Items 1,2,3 and 4. 
B) Items 1,2,3,4 and 5. 
C) Items 1,3,4 and 6. 
D) All six of the items listed. 
A) Items 1,2,3 and 4. 
B) Items 1,2,3,4 and 5. 
C) Items 1,3,4 and 6. 
D) All six of the items listed.

Question 3

East Bank has $10,000 in reserves,deposits of $20,000 and a target reserve ratio of 20%.How much is East Bank under- or over-reserved? What should East Bank do?

Accepted Answer

East Bank is over-re

Question 4

The Vancouver Bank has demand deposits of $300,000 and the target reserve ratio is 6 percent.If the bank's target reserves are equal to its excess reserves,then what must its actual reserves be?

Accepted Answer

A) 0. 
B) $18,000. 
C) $36,000. 
D) $108,000. 
E) That cannot be determined from the information. 
A) 0. 
B) $18,000. 
C) $36,000. 
D) $108,000. 
E) That cannot be determined from the information.

Question 5

Individuals in a society that had no medium of exchange would be forced to barter all goods and services directly.

Accepted Answer

A) True 
 B)False

Question 6

How is the money multiplier calculated?

Accepted Answer

A) By dividing the target reserve ratio by 1. 
B) By dividing the change in deposits by the change in reserves. 
C) By multiplying the target reserve ratio by M1. 
D) By multiplying the target reserve ratio by 1. 
A) By dividing the target reserve ratio by 1. 
B) By dividing the change in deposits by the change in reserves. 
C) By multiplying the target reserve ratio by M1. 
D) By multiplying the target reserve ratio by 1.

Question 7

Suppose that a bank calls in a customer's loan.Which of the following is correct?

Accepted Answer

A) The bank's loans to customers would increase and demand deposits would decrease. 
B) The bank's loans to customers would increase and reserves would decrease. 
C) The bank's loans to customers would increase and reserves would increase. 
D) The bank's loans to customers would decrease and reserves would increase. 
A) The bank's loans to customers would increase and demand deposits would decrease. 
B) The bank's loans to customers would increase and reserves would decrease. 
C) The bank's loans to customers would increase and reserves would increase. 
D) The bank's loans to customers would decrease and reserves would increase.

Question 8

What are the reserves of a commercial bank?

Accepted Answer

A) The amount of money-market funds it holds. 
B) Deposits at the Bank of Canada and vault cash. 
C) Vault cash plus securities. 
D) The bank's equity. 
E) Vault cash plus securities plus deposits at the Bank of Canada. 
A) The amount of money-market funds it holds. 
B) Deposits at the Bank of Canada and vault cash. 
C) Vault cash plus securities. 
D) The bank's equity. 
E) Vault cash plus securities plus deposits at the Bank of Canada.

Question 9

Futures Bank has $5,000 in excess reserves and a reserve ratio of 10%.Now suppose Futures Bank makes a loan of $5,000 to Sandra and she writes a cheque to Scott who a)deposits the cheque into his account at Futures Bank.What is the amount of excess reserves for Futures Bank? Explain.b)deposits the cheque into his account at Swaps Bank.What is the amount of excess reserves for Futures Bank? Explain.

Accepted Answer

a)Excess reserves will be $4,500.The loa

Question 10

If some of the recipients of bank loans keep portion of the loan in the form of cash,the money expansion process would expand.

Accepted Answer

A) True 
 B)False

Question 11

Below is a list of financial assets:
1.Certificates of deposit
2.Notice deposits (savings accounts)
3.Currency (coins and paper money)
4.Demand deposits (chequing accounts)
5.Government securities
6.Gold certificates
-Refer to the information above to answer this question.Which item(s)is included in the M1 definition of money?

Accepted Answer

A) 6 only. 
B) 2,3 and 4. 
C) 3 and 4. 
D) 3,4 and 6. 
E) 3 only. 
A) 6 only. 
B) 2,3 and 4. 
C) 3 and 4. 
D) 3,4 and 6. 
E) 3 only.

Question 12

What is true if a bank's balance sheet has $1.2 million in assets and $1 million in liabilities?

Accepted Answer

A) The bank must have been profitable this year. 
B) The bank has shareholders' equity of $0.2 million. 
C) Demand deposits must be $0.2 million. 
D) Cash reserves must be $0.2 million. 
A) The bank must have been profitable this year. 
B) The bank has shareholders' equity of $0.2 million. 
C) Demand deposits must be $0.2 million. 
D) Cash reserves must be $0.2 million.

Question 13

List some of the potential problems of using gold coins as money.

Accepted Answer

Three potential problems of us

Question 14

Which of the following transactions by a bank would increase the money supply?

Accepted Answer

A) The bank calls in a loan. 
B) A customer deposits cash with the bank. 
C) A customer withdraws cash from the bank. 
D) The bank grants a loan to a customer. 
A) The bank calls in a loan. 
B) A customer deposits cash with the bank. 
C) A customer withdraws cash from the bank. 
D) The bank grants a loan to a customer.

Question 15

What does it mean when a commercial bank has "excess reserves"?

Accepted Answer

A) It is in a position to make additional loans. 
B) Its reserves exceed its loans. 
C) It is making above-normal profits on its loans to customers. 
D) Its actual reserves are less than its target reserves. 
E) Its loans to customers exceeds its target reserves. 
A) It is in a position to make additional loans. 
B) Its reserves exceed its loans. 
C) It is making above-normal profits on its loans to customers. 
D) Its actual reserves are less than its target reserves. 
E) Its loans to customers exceeds its target reserves.

Question 16

Assume the Trusty Bank's balance sheet is as follows:
  
-Refer to the information above to answer this question.Assuming a target reserve ratio of 8 percent how much excess reserves would this bank have after a cheque for $10,000 was cleared against it?

Accepted Answer

A) 0. 
B) $4,200. 
C) $5,000. 
D) $14,200. 
E) $15,000. 
A) 0. 
B) $4,200. 
C) $5,000. 
D) $14,200. 
E) $15,000.

Question 17

If you were working out the cost of attending school next year,which function of money would you be using?

Accepted Answer

A) A medium of exchange. 
B) A unit of account. 
C) A store of wealth. 
A) A medium of exchange. 
B) A unit of account. 
C) A store of wealth.

Question 18

If people decide to hold more of their assets in the form of cash then what will happen to the value of the money multiplier?

Accepted Answer

A) It will be increased. 
B) It will be unaffected. 
C) It will be equal to twice the reciprocal of the target reserve ratio. 
D) It will be decreased. 
E) It will be greater than the reciprocal of the target reserve ratio multiplied by the excess reserves. 
A) It will be increased. 
B) It will be unaffected. 
C) It will be equal to twice the reciprocal of the target reserve ratio. 
D) It will be decreased. 
E) It will be greater than the reciprocal of the target reserve ratio multiplied by the excess reserves.

Question 19

Which of the following is true regarding the money multiplier?

Accepted Answer

A) It is larger,if the target reserve ratio is smaller. 
B) It will be zero when the target reserve ratio is 100 percent. 
C) It is the reciprocal of the bank's excess reserves. 
D) It is the reciprocal of the bank's actual reserves. 
E) It is larger,if the target reserve ratio is larger. 
A) It is larger,if the target reserve ratio is smaller. 
B) It will be zero when the target reserve ratio is 100 percent. 
C) It is the reciprocal of the bank's excess reserves. 
D) It is the reciprocal of the bank's actual reserves. 
E) It is larger,if the target reserve ratio is larger.

Question 20

"A decrease in notice deposits will decrease M1,M2,and M3." Evaluate this statement.

Accepted Answer

M1 = currency in circulation + demand de

If Guy and Laraine both have chequing accounts at the same bank and Guy writes a cheque for $1,000,payable to Laraine,what will happen to the bank's accounts?

East Bank has $10,000 in reserves,deposits of $20,000 and a target reserve ratio of 20%.How much is East Bank under- or over-reserved? What should East Bank do?

The Vancouver Bank has demand deposits of $300,000 and the target reserve ratio is 6 percent.If the bank's target reserves are equal to its excess reserves,then what must its actual reserves be?

Individuals in a society that had no medium of exchange would be forced to barter all goods and services directly.

How is the money multiplier calculated?

Suppose that a bank calls in a customer's loan.Which of the following is correct?

What are the reserves of a commercial bank?

If some of the recipients of bank loans keep portion of the loan in the form of cash,the money expansion process would expand.

What is true if a bank's balance sheet has $1.2 million in assets and $1 million in liabilities?

List some of the potential problems of using gold coins as money.

Which of the following transactions by a bank would increase the money supply?

What does it mean when a commercial bank has "excess reserves"?

Assume the Trusty Bank's balance sheet is as follows: -Refer to the information above to answer this question.Assuming a target reserve ratio of 8 percent how much excess reserves would this bank have after a cheque for $10,000 was cleared against it?

If you were working out the cost of attending school next year,which function of money would you be using?

If people decide to hold more of their assets in the form of cash then what will happen to the value of the money multiplier?

Which of the following is true regarding the money multiplier?

"A decrease in notice deposits will decrease M1,M2,and M3." Evaluate this statement.

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

The Money Market and Monetary Policy

International Trade

Exchange Rates and the Balance of Payments

Macroeconomic Policy Revisited

A Walk Through the Twentieth Century and Beyond

Filters

Exam 8: Money and Banking

If Guy and Laraine both have chequing accounts at the same bank and Guy writes a cheque for $1,000,payable to Laraine,what will happen to the bank's accounts?

East Bank has $10,000 in reserves,deposits of $20,000 and a target reserve ratio of 20%.How much is East Bank under- or over-reserved? What should East Bank do?

The Vancouver Bank has demand deposits of $300,000 and the target reserve ratio is 6 percent.If the bank's target reserves are equal to its excess reserves,then what must its actual reserves be?

Individuals in a society that had no medium of exchange would be forced to barter all goods and services directly.

How is the money multiplier calculated?

Suppose that a bank calls in a customer's loan.Which of the following is correct?

What are the reserves of a commercial bank?

If some of the recipients of bank loans keep portion of the loan in the form of cash,the money expansion process would expand.

What is true if a bank's balance sheet has $1.2 million in assets and $1 million in liabilities?

List some of the potential problems of using gold coins as money.

Which of the following transactions by a bank would increase the money supply?

What does it mean when a commercial bank has "excess reserves"?

Assume the Trusty Bank's balance sheet is as follows: -Refer to the information above to answer this question.Assuming a target reserve ratio of 8 percent how much excess reserves would this bank have after a cheque for $10,000 was cleared against it?

If you were working out the cost of attending school next year,which function of money would you be using?

If people decide to hold more of their assets in the form of cash then what will happen to the value of the money multiplier?

Which of the following is true regarding the money multiplier?

"A decrease in notice deposits will decrease M1,M2,and M3." Evaluate this statement.

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

The Money Market and Monetary Policy

International Trade

Exchange Rates and the Balance of Payments

Macroeconomic Policy Revisited

A Walk Through the Twentieth Century and Beyond

Filters