Question 1

Why is the banking system able to increase loans and demand deposits by a multiple of its excess reserves?

Accepted Answer

A) Because reserves lost by one bank are gained by another. 
B) Because the MPC of borrowers is positive. 
C) Because one person's debt becomes another person's income. 
D) Because the target reserve ratio is greater than 1. 
A) Because reserves lost by one bank are gained by another. 
B) Because the MPC of borrowers is positive. 
C) Because one person's debt becomes another person's income. 
D) Because the target reserve ratio is greater than 1.

Question 2

What happens when a bank has a cheque cleared against it?

Accepted Answer

A) The amount of its reserves will fall. 
B) The amount of outstanding loans will fall. 
C) The excess reserves of the banking system will fall. 
D) The bank's balance sheet does not change. 
E) The total supply of money will fall. 
A) The amount of its reserves will fall. 
B) The amount of outstanding loans will fall. 
C) The excess reserves of the banking system will fall. 
D) The bank's balance sheet does not change. 
E) The total supply of money will fall.

Question 3

What is meant by the term "the spread"?

Accepted Answer

A) The method in which the nation's money supply is distributed through the economy. 
B) The fact that Canada has five large banks each with coast to coast branches. 
C) The fact that the Bank of Canada is independent from the commercial banks. 
D) The difference between the rate of interest a bank charges borrowers and the rate it pays savers. 
A) The method in which the nation's money supply is distributed through the economy. 
B) The fact that Canada has five large banks each with coast to coast branches. 
C) The fact that the Bank of Canada is independent from the commercial banks. 
D) The difference between the rate of interest a bank charges borrowers and the rate it pays savers.

Question 4

Explain why bank reserves are not a part of money supply.

Accepted Answer

When a deposit is made,the res

Question 5

How is the major portion of the Canadian money supply created?

Accepted Answer

A) By the actions of the Canadian mint. 
B) By the actions of the commercial banks and the Bank of Canada. 
C) Through the receipt of gold bullion via international trade. 
D) By the actions of the Department of Finance. 
E) Through loans from the International Monetary Fund. 
A) By the actions of the Canadian mint. 
B) By the actions of the commercial banks and the Bank of Canada. 
C) Through the receipt of gold bullion via international trade. 
D) By the actions of the Department of Finance. 
E) Through loans from the International Monetary Fund.

Question 6

What is the major component of the Canadian M1 money supply?

Accepted Answer

A) Gold certificates. 
B) Demand deposits. 
C) Paper money in circulation. 
D) Coins. 
E) Savings accounts. 
A) Gold certificates. 
B) Demand deposits. 
C) Paper money in circulation. 
D) Coins. 
E) Savings accounts.

Question 7

What is meant by the term commodity money?

Accepted Answer

A) The use of coins to purchase commodities. 
B) A type of certificate of deposit that can be used to buy commodities. 
C) A share invested in commodities. 
D) A type of money that can also function as a commodity. 
A) The use of coins to purchase commodities. 
B) A type of certificate of deposit that can be used to buy commodities. 
C) A share invested in commodities. 
D) A type of money that can also function as a commodity.

Question 8

Suppose that Adam Ricardo deposits $1,000 of cash into the Penguins Bank.On the same day,David Smith negotiates a loan for $4,000.By how much has the money supply changed?

Accepted Answer

A) It has increased by $3,000. 
B) It has decreased by $3,000. 
C) It has increased by $4,000. 
D) It has increased by $5,000. 
A) It has increased by $3,000. 
B) It has decreased by $3,000. 
C) It has increased by $4,000. 
D) It has increased by $5,000.

Question 9

The following table shows the balance sheet for the Senators' Bank,which has a target reserve ratio of 8 percent.
   a)By how much is the Senators' Bank over- or under-reserved?
b)If the bank makes a loan in an amount equal to the excess reserves and the borrower writes a cheque (for the full amount of the loan)to another customer of the bank who then deposits it,what will be the new amount of excess reserves?
c)If instead,the cheque written by the borrower is cleared against the Senators' Bank (the cheque was written to a customer of another bank),what will now be the amount of excess reserves?

Accepted Answer

a)over-res

Question 10

All of the following except one are characteristics that money should possess.Which is the exception?

Accepted Answer

A) It should have general acceptability. 
B) It should be divisible. 
C) It should be convertible into gold or other precious metals. 
D) It should be portable. 
E) It should be durable. 
A) It should have general acceptability. 
B) It should be divisible. 
C) It should be convertible into gold or other precious metals. 
D) It should be portable. 
E) It should be durable.

Question 11

What happens if a bank decides to keep a larger percentage of its deposits on reserve?

Accepted Answer

A) Profits will increase but depositors will feel less secure. 
B) Profits will increase and depositors will feel more secure. 
C) Profits will decrease and depositors will feel less secure. 
D) Profits will decrease but depositors will feel more secure. 
E) Profits will increase and depositors will be indifferent. 
A) Profits will increase but depositors will feel less secure. 
B) Profits will increase and depositors will feel more secure. 
C) Profits will decrease and depositors will feel less secure. 
D) Profits will decrease but depositors will feel more secure. 
E) Profits will increase and depositors will be indifferent.

Question 12

What is the prime function of money? Explain.

Accepted Answer

The prime function of money is that it a

Question 13

The following is the balance sheet of the whole banking system (all figures are in $billions)which has a target reserve ratio of 20 percent:
  
-Refer to the information above to answer this question.At present,what is the amount of excess reserves of the commercial banking system?

Accepted Answer

A) $0. 
B) $120. 
C) $240. 
D) $20. 
A) $0. 
B) $120. 
C) $240. 
D) $20.

Question 14

Money acts as a medium of exchange,a store of wealth,and a unit of account.

Accepted Answer

A) True 
 B)False

Question 15

What is the value of the money multiplier?

Accepted Answer

A) 1 divided by the target reserve ratio. 
B) The reciprocal of the MPC. 
C) M1 divided by the multiplier. 
D) It is always 2. 
A) 1 divided by the target reserve ratio. 
B) The reciprocal of the MPC. 
C) M1 divided by the multiplier. 
D) It is always 2.

Question 16

All of the following statements,except one,are correct.Which is the exception?

Accepted Answer

A) A commercial bank's total reserves are equal to its excess reserves plus its target reserves. 
B) A bank's assets plus its net worth equal its liabilities. 
C) When a commercial bank gives a loan it creates demand deposits. 
D) A single commercial bank can safely lend only an amount up to the value of its excess reserves. 
E) If a bank transaction were to decrease the value of one of its assets,then either some other asset would increase in value or one of its liabilities would decrease in value. 
A) A commercial bank's total reserves are equal to its excess reserves plus its target reserves. 
B) A bank's assets plus its net worth equal its liabilities. 
C) When a commercial bank gives a loan it creates demand deposits. 
D) A single commercial bank can safely lend only an amount up to the value of its excess reserves. 
E) If a bank transaction were to decrease the value of one of its assets,then either some other asset would increase in value or one of its liabilities would decrease in value.

Question 17

If a student takes some of her money out of her safety deposit box at a bank in order to buy a used Porsche,which function of money would she be using?

Accepted Answer

A) A medium of exchange. 
B) A store of wealth. 
C) A unit of account. 
D) A medium of exchange,a store of wealth,and a unit of account. 
A) A medium of exchange. 
B) A store of wealth. 
C) A unit of account. 
D) A medium of exchange,a store of wealth,and a unit of account.

Question 18

Which of the following is true of Canadian banks compared to U.S.banks?

Accepted Answer

A) Canadian banks are more competitive. 
B) Canadian banks are more likely to fail. 
C) Canadian banks are,on average,smaller. 
D) Canadian banks are more secure. 
E) Canadian banks are less conservative. 
A) Canadian banks are more competitive. 
B) Canadian banks are more likely to fail. 
C) Canadian banks are,on average,smaller. 
D) Canadian banks are more secure. 
E) Canadian banks are less conservative.

Question 19

If you put some of your summer earnings into a safety deposit box at the bank,which function of money would you be using?

Accepted Answer

A) A medium of exchange. 
B) A store of wealth. 
C) A unit of account. 
D) A medium of exchange,a store of wealth,and a unit of account. 
A) A medium of exchange. 
B) A store of wealth. 
C) A unit of account. 
D) A medium of exchange,a store of wealth,and a unit of account.

Question 20

If someone deposits a $100 bill in a commercial bank which has a 5 percent target reserve ratio,which of the following is true?

Accepted Answer

A) The bank will have $95 of additional excess reserves. 
B) The bank will have $100 of required reserves. 
C) The bank will have $100 of additional excess reserves. 
D) The bank will be capable of lending an additional $2,000. 
E) The bank will be capable of lending an additional $100. 
A) The bank will have $95 of additional excess reserves. 
B) The bank will have $100 of required reserves. 
C) The bank will have $100 of additional excess reserves. 
D) The bank will be capable of lending an additional $2,000. 
E) The bank will be capable of lending an additional $100.

Why is the banking system able to increase loans and demand deposits by a multiple of its excess reserves?

What happens when a bank has a cheque cleared against it?

What is meant by the term "the spread"?

Explain why bank reserves are not a part of money supply.

How is the major portion of the Canadian money supply created?

What is the major component of the Canadian M1 money supply?

What is meant by the term commodity money?

Suppose that Adam Ricardo deposits $1,000 of cash into the Penguins Bank.On the same day,David Smith negotiates a loan for $4,000.By how much has the money supply changed?

All of the following except one are characteristics that money should possess.Which is the exception?

What happens if a bank decides to keep a larger percentage of its deposits on reserve?

What is the prime function of money? Explain.

The following is the balance sheet of the whole banking system (all figures are in $billions)which has a target reserve ratio of 20 percent: -Refer to the information above to answer this question.At present,what is the amount of excess reserves of the commercial banking system?

Money acts as a medium of exchange,a store of wealth,and a unit of account.

What is the value of the money multiplier?

All of the following statements,except one,are correct.Which is the exception?

If a student takes some of her money out of her safety deposit box at a bank in order to buy a used Porsche,which function of money would she be using?

Which of the following is true of Canadian banks compared to U.S.banks?

If you put some of your summer earnings into a safety deposit box at the bank,which function of money would you be using?

If someone deposits a $100 bill in a commercial bank which has a 5 percent target reserve ratio,which of the following is true?

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

Why is the banking system able to increase loans and demand deposits by a multiple of its excess reserves?

What happens when a bank has a cheque cleared against it?

What is meant by the term "the spread"?

Explain why bank reserves are not a part of money supply.

How is the major portion of the Canadian money supply created?

What is the major component of the Canadian M1 money supply?

What is meant by the term commodity money?

Suppose that Adam Ricardo deposits $1,000 of cash into the Penguins Bank.On the same day,David Smith negotiates a loan for $4,000.By how much has the money supply changed?

All of the following except one are characteristics that money should possess.Which is the exception?

What happens if a bank decides to keep a larger percentage of its deposits on reserve?

What is the prime function of money? Explain.

The following is the balance sheet of the whole banking system (all figures are in $billions)which has a target reserve ratio of 20 percent: -Refer to the information above to answer this question.At present,what is the amount of excess reserves of the commercial banking system?

Money acts as a medium of exchange,a store of wealth,and a unit of account.

What is the value of the money multiplier?

All of the following statements,except one,are correct.Which is the exception?

If a student takes some of her money out of her safety deposit box at a bank in order to buy a used Porsche,which function of money would she be using?

Which of the following is true of Canadian banks compared to U.S.banks?

If you put some of your summer earnings into a safety deposit box at the bank,which function of money would you be using?

If someone deposits a $100 bill in a commercial bank which has a 5 percent target reserve ratio,which of the following is true?

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