Question 1

Money is often said to be "socially defined." What does this mean?

Accepted Answer

A) That parliament has defined what money is. 
B) That society defines what money is in terms of what it deems acceptable. 
C) That the money supply includes all public and private securities purchased by society. 
D) That only the Bank of Canada can supply money and this bank is owned by the public. 
E) That a nation's money supply must be backed by something socially acceptable such as gold. 
A) That parliament has defined what money is. 
B) That society defines what money is in terms of what it deems acceptable. 
C) That the money supply includes all public and private securities purchased by society. 
D) That only the Bank of Canada can supply money and this bank is owned by the public. 
E) That a nation's money supply must be backed by something socially acceptable such as gold.

Question 2

The following is the balance sheet of the whole banking system (all figures are in $billions):
  
-Refer to the information above to answer this question.Assume that the target reserve ratio is 5 percent.At present,what is the amount of excess reserves of the commercial banking system?

Accepted Answer

A) $2. 
B) $7. 
C) $70. 
D) $18. 
E) $40. 
A) $2. 
B) $7. 
C) $70. 
D) $18. 
E) $40.

Question 3

Assume the Trusty Bank's balance sheet is as follows:
  
-Refer to the information above to answer this question.If the bank's target reserve ratio is 10%,which of the following is correct?

Accepted Answer

A) The bank's reserves are in equilibrium. 
B) There are excess reserves of $9,000. 
C) The bank is under-reserved by $9,000. 
D) There are excess reserves of $3,500. 
A) The bank's reserves are in equilibrium. 
B) There are excess reserves of $9,000. 
C) The bank is under-reserved by $9,000. 
D) There are excess reserves of $3,500.

Question 4

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.Most of the following items are included in the official definitions of money.Which is/are the exception?

Accepted Answer

A) Items 1 and 5. 
B) Items 1 and 6. 
C) Items 5 and 6. 
D) Item 6. 
A) Items 1 and 5. 
B) Items 1 and 6. 
C) Items 5 and 6. 
D) Item 6.

Question 5

What is the result if banks maintain 100 percent reserves?

Accepted Answer

A) The money multiplier would have a value of zero. 
B) Banks would be less profitable. 
C) The money multiplier would be infinite. 
D) The money supply would be larger. 
A) The money multiplier would have a value of zero. 
B) Banks would be less profitable. 
C) The money multiplier would be infinite. 
D) The money supply would be larger.

Question 6

Historically,why were goldsmiths able to create money?

Accepted Answer

A) Because consumers and merchants preferred to use gold rather than currency for transactions. 
B) Because they always kept 100 percent reserves. 
C) Because only a few of their customers would redeem their notes for gold at any one time. 
D) Because they held the right to print money. 
A) Because consumers and merchants preferred to use gold rather than currency for transactions. 
B) Because they always kept 100 percent reserves. 
C) Because only a few of their customers would redeem their notes for gold at any one time. 
D) Because they held the right to print money.

Question 7

Which function of money allows it to replace barter in the economy?

Accepted Answer

A) Medium of exchange. 
B) Store of value. 
C) Unit of account. 
D) Medium of exchange,store of value,and unit of account. 
A) Medium of exchange. 
B) Store of value. 
C) Unit of account. 
D) Medium of exchange,store of value,and unit of account.

Question 8

Peter deposits $100 cash into his account at a commercial bank.Has the amount of money supply changed? Explain.

Accepted Answer

The money supply did not change.By putti

Question 9

What will happen to the money multiplier,if:
a)target reserve ratio decreases
b)people hold more cash
c)people do not take out loans

Accepted Answer

a)Money multiplier will increa

Question 10

Define the term target reserve ratio.

Accepted Answer

The target reserve ratio is th

Question 11

If the target reserve ratio were 100 percent,what would be the value of the money multiplier?

Accepted Answer

A) 100. 
B) 1. 
C) 0. 
D) 10. 
E) Infinite. 
A) 100. 
B) 1. 
C) 0. 
D) 10. 
E) Infinite.

Question 12

The Manitoba Bank has $20,000 in excess reserves and the target reserve ratio is 15 percent.Which of the following statements is valid?

Accepted Answer

A) The bank has $100,000 in outstanding loans and $35,000 in actual reserves. 
B) The bank has $200,000 in demand deposits and $50,000 in actual reserves. 
C) The bank has $200,000 in demand deposits and $10,000 in actual reserves. 
D) The bank has $100,000 in demand deposits and $5,000 in actual reserves. 
E) The bank has $100,000 in outstanding loans and $5,000 in actual reserves. 
A) The bank has $100,000 in outstanding loans and $35,000 in actual reserves. 
B) The bank has $200,000 in demand deposits and $50,000 in actual reserves. 
C) The bank has $200,000 in demand deposits and $10,000 in actual reserves. 
D) The bank has $100,000 in demand deposits and $5,000 in actual reserves. 
E) The bank has $100,000 in outstanding loans and $5,000 in actual reserves.

Question 13

How does a banking system create money?

Accepted Answer

A banking system creates money

Question 14

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.After the deposit of $20,what is the maximum amount by which this commercial banking system can expand the supply of money?

Accepted Answer

A) $0. 
B) $16. 
C) $320. 
D) $80. 
E) $100. 
A) $0. 
B) $16. 
C) $320. 
D) $80. 
E) $100.

Question 15

Which of the following does the M2 definition of money include?

Accepted Answer

A) Only currency in circulation and savings accounts. 
B) Only coins,paper money,and demand deposits. 
C) Only currency in circulation 
D) Currency in circulation,demand deposits,personal term deposits,and personal and non-personal savings (notice)deposits. 
E) Currency in circulation,demand deposits and personal and non-personal notice and term deposits. 
A) Only currency in circulation and savings accounts. 
B) Only coins,paper money,and demand deposits. 
C) Only currency in circulation 
D) Currency in circulation,demand deposits,personal term deposits,and personal and non-personal savings (notice)deposits. 
E) Currency in circulation,demand deposits and personal and non-personal notice and term deposits.

Question 16

The following is the balance sheet of the whole banking system (all figures are in $billions):
  
-Refer to the information above to answer this question.Assume that the target reserve ratio is 5 percent.If the commercial banking system were to actually lend the maximum amount that it is able to lend,what would be the result?

Accepted Answer

A) Reserves and deposits will increase by that amount. 
B) Excess reserves will drop to $38 billion. 
C) Excess reserves will drop to $2 billion. 
D) Excess reserves will be reduced to zero. 
E) Reserves and deposits will decrease by that amount. 
A) Reserves and deposits will increase by that amount. 
B) Excess reserves will drop to $38 billion. 
C) Excess reserves will drop to $2 billion. 
D) Excess reserves will be reduced to zero. 
E) Reserves and deposits will decrease by that amount.

Question 17

Assume that Kim deposits $1,500 in currency in the Trusty Bank.Later that same day Akio negotiates a loan for $2,000 at the same bank.What has happened to the money supply as a result of these transactions?

Accepted Answer

A) It has not changed. 
B) It has decreased by $1,000. 
C) It has increased by $500. 
D) It has decreased by $500. 
E) It has increased by $2,000. 
A) It has not changed. 
B) It has decreased by $1,000. 
C) It has increased by $500. 
D) It has decreased by $500. 
E) It has increased by $2,000.

Question 18

What effect would a recession likely have on the size of the money multiplier?

Accepted Answer

A) It would have no effect. 
B) It would make it larger. 
C) It would make it smaller,depending on the demand for loans. 
D) It could make it smaller or larger,depending on the expenditures multiplier. 
A) It would have no effect. 
B) It would make it larger. 
C) It would make it smaller,depending on the demand for loans. 
D) It could make it smaller or larger,depending on the expenditures multiplier.

Question 19

Suppose that the customer of a bank writes a cheque payable to a tennis club who deposits the cheque at the same bank.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 reserves would increase but its demand deposits would decrease. 
C) The bank's reserves would decrease but its demand deposits would increase. 
D) The bank's loans to customers would decrease and reserves would increase. 
E) The bank's reserves and demand deposits would not change. 
A) The bank's loans to customers would increase and demand deposits would decrease. 
B) The bank's reserves would increase but its demand deposits would decrease. 
C) The bank's reserves would decrease but its demand deposits would increase. 
D) The bank's loans to customers would decrease and reserves would increase. 
E) The bank's reserves and demand deposits would not change.

Question 20

All of the following except one are kinds of money used at some point in history.Which is the exception?

Accepted Answer

A) Commodity money. 
B) Gold and precious metals. 
C) Paper money. 
D) Government bonds. 
E) Cheque book money. 
A) Commodity money. 
B) Gold and precious metals. 
C) Paper money. 
D) Government bonds. 
E) Cheque book money.

Money is often said to be "socially defined." What does this mean?

The following is the balance sheet of the whole banking system (all figures are in $billions): -Refer to the information above to answer this question.Assume that the target reserve ratio is 5 percent.At present,what is the amount of excess reserves of the commercial banking system?

Assume the Trusty Bank's balance sheet is as follows: -Refer to the information above to answer this question.If the bank's target reserve ratio is 10%,which of the following is correct?

What is the result if banks maintain 100 percent reserves?

Historically,why were goldsmiths able to create money?

Which function of money allows it to replace barter in the economy?

Peter deposits $100 cash into his account at a commercial bank.Has the amount of money supply changed? Explain.

What will happen to the money multiplier,if: a)target reserve ratio decreases b)people hold more cash c)people do not take out loans

Define the term target reserve ratio.

If the target reserve ratio were 100 percent,what would be the value of the money multiplier?

The Manitoba Bank has $20,000 in excess reserves and the target reserve ratio is 15 percent.Which of the following statements is valid?

How does a banking system create money?

Which of the following does the M2 definition of money include?

Assume that Kim deposits $1,500 in currency in the Trusty Bank.Later that same day Akio negotiates a loan for $2,000 at the same bank.What has happened to the money supply as a result of these transactions?

What effect would a recession likely have on the size of the money multiplier?

Suppose that the customer of a bank writes a cheque payable to a tennis club who deposits the cheque at the same bank.Which of the following is correct?

All of the following except one are kinds of money used at some point in history.Which is the exception?

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

Money is often said to be "socially defined." What does this mean?

The following is the balance sheet of the whole banking system (all figures are in $billions): -Refer to the information above to answer this question.Assume that the target reserve ratio is 5 percent.At present,what is the amount of excess reserves of the commercial banking system?

Assume the Trusty Bank's balance sheet is as follows: -Refer to the information above to answer this question.If the bank's target reserve ratio is 10%,which of the following is correct?

What is the result if banks maintain 100 percent reserves?

Historically,why were goldsmiths able to create money?

Which function of money allows it to replace barter in the economy?

Peter deposits $100 cash into his account at a commercial bank.Has the amount of money supply changed? Explain.

What will happen to the money multiplier,if: a)target reserve ratio decreases b)people hold more cash c)people do not take out loans

Define the term target reserve ratio.

If the target reserve ratio were 100 percent,what would be the value of the money multiplier?

The Manitoba Bank has $20,000 in excess reserves and the target reserve ratio is 15 percent.Which of the following statements is valid?

How does a banking system create money?

Which of the following does the M2 definition of money include?

Assume that Kim deposits $1,500 in currency in the Trusty Bank.Later that same day Akio negotiates a loan for $2,000 at the same bank.What has happened to the money supply as a result of these transactions?

What effect would a recession likely have on the size of the money multiplier?

Suppose that the customer of a bank writes a cheque payable to a tennis club who deposits the cheque at the same bank.Which of the following is correct?

All of the following except one are kinds of money used at some point in history.Which is the exception?

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