Question 1

The money multiplier is equal to

Accepted Answer

A) the reserve ratio. 
B) the inverse of the reserve ratio. 
C) the reserve requirement. 
D) the number of dollars on reserve. 
A) the reserve ratio. 
B) the inverse of the reserve ratio. 
C) the reserve requirement. 
D) the number of dollars on reserve. B

Question 2

Fractional reserve banking refers to a banking system in which

Accepted Answer

A) bank deposits are less than bank reserves. 
B) bank reserves are only a fraction of total deposits. 
C) bank reserves are only a fraction of desired reserves. 
D) bank loans are less than bank reserves. 
A) bank deposits are less than bank reserves. 
B) bank reserves are only a fraction of total deposits. 
C) bank reserves are only a fraction of desired reserves. 
D) bank loans are less than bank reserves. B

Question 3

Table 13-1
  
-In Table 13-1,suppose that $10,000 in new deposits is received by the bank.If there were no other changes in the balance sheet,then the bank would be in a position to make new loans in the amount of

Accepted Answer

A) $13,000. 
B) $15,000. 
C) $10,000. 
D) $8,000. 
A) $13,000. 
B) $15,000. 
C) $10,000. 
D) $8,000. A

Question 4

"An increase in the reserve requirement is a tax increase on banks." Do you agree or disagree with this statement? Why?

Accepted Answer

Agree.Banks do not receive interest on r

Question 5

With the fractional banking system in Canada,a commercial bank with $1,000 of deposits generally would

Accepted Answer

A) maintain $1,000 of cash reserves. 
B) have no reserves. 
C) maintain less than $1,000 but more than $0 in cash reserves. 
D) maintain more than $1,000 of cash reserves. 
A) maintain $1,000 of cash reserves. 
B) have no reserves. 
C) maintain less than $1,000 but more than $0 in cash reserves. 
D) maintain more than $1,000 of cash reserves.

Question 6

The CDIC can

Accepted Answer

A) charge all banks different rate. 
B) pay too much attention to the riskiness of the bank in setting prices. 
C) require sound business practices. 
D) insure deposits over $100,000. 
A) charge all banks different rate. 
B) pay too much attention to the riskiness of the bank in setting prices. 
C) require sound business practices. 
D) insure deposits over $100,000.

Question 7

The desired reserve ratio is 10 percent.A bank with $10 million in deposits has $700,000 in vault cash and $200,000 on deposit with the Bank of Canada.A person deposits a cheque for $1 million in the bank.The excess reserves of the bank are now

Accepted Answer

A) $1 million. 
B) $900,000. 
C) $800,000. 
D) -$100,000. 
A) $1 million. 
B) $900,000. 
C) $800,000. 
D) -$100,000.

Question 8

The money multiplier is 5 when

Accepted Answer

A) the reserve requirement ratio is 10 percent. 
B) the reserve requirement ratio is 20 percent. 
C) the reserve requirement ratio is 50 percent. 
D) excess reserves expand 500 percent. 
A) the reserve requirement ratio is 10 percent. 
B) the reserve requirement ratio is 20 percent. 
C) the reserve requirement ratio is 50 percent. 
D) excess reserves expand 500 percent.

Question 9

Asymmetric information before a transaction takes place generates the problem of

Accepted Answer

A) flawed bank regulation. 
B) intermediation. 
C) adverse selection. 
D) bank runs. 
A) flawed bank regulation. 
B) intermediation. 
C) adverse selection. 
D) bank runs.

Question 10

Table 13-1
  
-In Table 13-1,suppose that $15,000 in new deposits is received by the bank.If there were no other changes in the balance sheet,then the bank would be in a position to make new loans in the amount of

Accepted Answer

A) $17,000. 
B) $15,000. 
C) $10,000. 
D) $8,000. 
A) $17,000. 
B) $15,000. 
C) $10,000. 
D) $8,000.

Question 11

Table 13-4
  
-In Table 13-4,if the Bank of Wealth purchases a $25,000 government security

Accepted Answer

A) the bank would still have $10,000 in excess reserves. 
B) the bank would have a reserve deficiency of $25,000. 
C) the bank would have a reserve deficiency of $15,000. 
D) the bank would have no excess reserves. 
A) the bank would still have $10,000 in excess reserves. 
B) the bank would have a reserve deficiency of $25,000. 
C) the bank would have a reserve deficiency of $15,000. 
D) the bank would have no excess reserves.

Question 12

Describe how desired reserves are used in the banking structure in Canada.More specifically,who sets the desired reserves and how are they used to expand the money supply.

Accepted Answer

Desired reserves are the minimum amount

Question 13

What forces can make the money multiplier smaller than the reciprocal of the required reserve ratio?

Accepted Answer

Banks may choose to hold some excess res

Question 14

If the desired reserve ratio is 10 percent and reserves in the commercial banking system increase by $10,000,the maximum possible expansion of demand deposits is

Accepted Answer

A) $10,000. 
B) $90,000. 
C) $100,000. 
D) $1,000,000. 
A) $10,000. 
B) $90,000. 
C) $100,000. 
D) $1,000,000.

Question 15

There are zero excess reserves at all banks and the required reserve ratio is 20 percent.If a check for $100,000 on Bank ABC is deposited in Bank XYZ,then excess reserves at Bank ABC equal ________ and excess reserves at Bank XYZ equal ________.

Accepted Answer

A) -$20,000;+$80,000 
B) -$100,000;+$80,000 
C) -$80,000;+$100,000 
D) -$80,000;+$80,000 
A) -$20,000;+$80,000 
B) -$100,000;+$80,000 
C) -$80,000;+$100,000 
D) -$80,000;+$80,000

Question 16

Which of the following is a TRUE statement?

Accepted Answer

A) Decreases in the money supply lead to increases in the inflation rate. 
B) Increases in the money supply lead to a decrease in the price level. 
C) Changes in the rate of growth of the money supply lead to increases in the inflation rate. 
D) There is no relationship between money supply and inflation. 
A) Decreases in the money supply lead to increases in the inflation rate. 
B) Increases in the money supply lead to a decrease in the price level. 
C) Changes in the rate of growth of the money supply lead to increases in the inflation rate. 
D) There is no relationship between money supply and inflation.

Question 17

Most economists would argue that a significant increase in the supply of money will

Accepted Answer

A) decrease technological change. 
B) reduce the price level. 
C) be inflationary. 
D) help the manufacturing sector at the expense of the service sector. 
A) decrease technological change. 
B) reduce the price level. 
C) be inflationary. 
D) help the manufacturing sector at the expense of the service sector.

Question 18

Explain the process by which the banking system creates money

Accepted Answer

When a bank has excess reserves,it uses

Question 19

If a bank has $100,000 in demand deposits and $30,000 on reserve with a 20 percent reserve requirement,the bank

Accepted Answer

A) has desired reserves of $30,000. 
B) has legal reserves of $10,000. 
C) has excess reserves of $10,000. 
D) has desired reserves of $10,000. 
A) has desired reserves of $30,000. 
B) has legal reserves of $10,000. 
C) has excess reserves of $10,000. 
D) has desired reserves of $10,000.

Question 20

The desired reserve ratio is 10 percent.All banks have zero excess reserves.A cheque for $500,000 is deposited in Bank A,written on an account at Bank B.By how much does the money supply change if all banks make loans so that they have zero excess reserves?

Accepted Answer

A) $500,000 
B) 0 
C) $450,000 
D) $4,500,000 
A) $500,000 
B) 0 
C) $450,000 
D) $4,500,000

The money multiplier is equal to

Fractional reserve banking refers to a banking system in which

Table 13-1 -In Table 13-1,suppose that $10,000 in new deposits is received by the bank.If there were no other changes in the balance sheet,then the bank would be in a position to make new loans in the amount of

"An increase in the reserve requirement is a tax increase on banks." Do you agree or disagree with this statement? Why?

With the fractional banking system in Canada,a commercial bank with $1,000 of deposits generally would

The CDIC can

The desired reserve ratio is 10 percent.A bank with $10 million in deposits has $700,000 in vault cash and $200,000 on deposit with the Bank of Canada.A person deposits a cheque for $1 million in the bank.The excess reserves of the bank are now

The money multiplier is 5 when

Asymmetric information before a transaction takes place generates the problem of

Table 13-1 -In Table 13-1,suppose that $15,000 in new deposits is received by the bank.If there were no other changes in the balance sheet,then the bank would be in a position to make new loans in the amount of

Table 13-4 -In Table 13-4,if the Bank of Wealth purchases a $25,000 government security

Describe how desired reserves are used in the banking structure in Canada.More specifically,who sets the desired reserves and how are they used to expand the money supply.

What forces can make the money multiplier smaller than the reciprocal of the required reserve ratio?

If the desired reserve ratio is 10 percent and reserves in the commercial banking system increase by $10,000,the maximum possible expansion of demand deposits is

There are zero excess reserves at all banks and the required reserve ratio is 20 percent.If a check for $100,000 on Bank ABC is deposited in Bank XYZ,then excess reserves at Bank ABC equal and excess reserves at Bank XYZ equal .

Which of the following is a TRUE statement?

Most economists would argue that a significant increase in the supply of money will

Explain the process by which the banking system creates money

If a bank has $100,000 in demand deposits and $30,000 on reserve with a 20 percent reserve requirement,the bank

The desired reserve ratio is 10 percent.All banks have zero excess reserves.A cheque for $500,000 is deposited in Bank A,written on an account at Bank B.By how much does the money supply change if all banks make loans so that they have zero excess reserves?

The Nature of Economics

Production Possibilities and Economic Systems

Demand and Supply

Introduction to Macroeconomics

Measuring the Economys Performance

Modelling Real Gdp and the Price Level in the Long Run

Economic Growth and Development

Modelling Real Gdp and the Price Level in the Short Run

Consumption, investment, and the Multiplier

The Public Sector

Fiscal Policy and the Public Debt

Money and the Banking System

The Bank of Canada and Monetary Policy

Issues in Stabilization Policy

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 13: Money Creation and Deposit Insurance

The money multiplier is equal to

Fractional reserve banking refers to a banking system in which

Table 13-1 -In Table 13-1,suppose that $10,000 in new deposits is received by the bank.If there were no other changes in the balance sheet,then the bank would be in a position to make new loans in the amount of

"An increase in the reserve requirement is a tax increase on banks." Do you agree or disagree with this statement? Why?

With the fractional banking system in Canada,a commercial bank with $1,000 of deposits generally would

The CDIC can

The desired reserve ratio is 10 percent.A bank with $10 million in deposits has $700,000 in vault cash and $200,000 on deposit with the Bank of Canada.A person deposits a cheque for $1 million in the bank.The excess reserves of the bank are now

The money multiplier is 5 when

Asymmetric information before a transaction takes place generates the problem of

Table 13-1 -In Table 13-1,suppose that $15,000 in new deposits is received by the bank.If there were no other changes in the balance sheet,then the bank would be in a position to make new loans in the amount of

Table 13-4 -In Table 13-4,if the Bank of Wealth purchases a $25,000 government security

Describe how desired reserves are used in the banking structure in Canada.More specifically,who sets the desired reserves and how are they used to expand the money supply.

What forces can make the money multiplier smaller than the reciprocal of the required reserve ratio?

If the desired reserve ratio is 10 percent and reserves in the commercial banking system increase by $10,000,the maximum possible expansion of demand deposits is

There are zero excess reserves at all banks and the required reserve ratio is 20 percent.If a check for $100,000 on Bank ABC is deposited in Bank XYZ,then excess reserves at Bank ABC equal ________ and excess reserves at Bank XYZ equal ________.

Which of the following is a TRUE statement?

Most economists would argue that a significant increase in the supply of money will

Explain the process by which the banking system creates money

If a bank has $100,000 in demand deposits and $30,000 on reserve with a 20 percent reserve requirement,the bank

The desired reserve ratio is 10 percent.All banks have zero excess reserves.A cheque for $500,000 is deposited in Bank A,written on an account at Bank B.By how much does the money supply change if all banks make loans so that they have zero excess reserves?

The Nature of Economics

Production Possibilities and Economic Systems

Demand and Supply

Introduction to Macroeconomics

Measuring the Economys Performance

Modelling Real Gdp and the Price Level in the Long Run

Economic Growth and Development

Modelling Real Gdp and the Price Level in the Short Run

Consumption, investment, and the Multiplier

The Public Sector

Fiscal Policy and the Public Debt

Money and the Banking System

The Bank of Canada and Monetary Policy

Issues in Stabilization Policy

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

There are zero excess reserves at all banks and the required reserve ratio is 20 percent.If a check for $100,000 on Bank ABC is deposited in Bank XYZ,then excess reserves at Bank ABC equal and excess reserves at Bank XYZ equal .