Question 1

What are reserves? Discuss the various types of reserves used in the Canadian banking system.

Accepted Answer

Reserves are assets held by a depository

Question 2

The actual change in the money supply equals

Accepted Answer

A) the actual change in reserves. 
B) the actual change in excess reserves times the desired reserve ratio. 
C) the change in excess reserves times the money multiplier. 
D) the change in desired reserves times the money multiplier. 
A) the actual change in reserves. 
B) the actual change in excess reserves times the desired reserve ratio. 
C) the change in excess reserves times the money multiplier. 
D) the change in desired reserves times the money multiplier.

Question 3

Changes in the money supply are important because

Accepted Answer

A) there is a relationship between changes in the money supply and changes in government spending. 
B) there is a relationship between changes in the money supply and changes in nominal GDP. 
C) there is an inverse relationship between changes in the money supply and the inflation rate. 
D) there is a direct relationship between changes in the money supply and changes in interest rates. 
A) there is a relationship between changes in the money supply and changes in government spending. 
B) there is a relationship between changes in the money supply and changes in nominal GDP. 
C) there is an inverse relationship between changes in the money supply and the inflation rate. 
D) there is a direct relationship between changes in the money supply and changes in interest rates.

Question 4

Assuming there are no excess reserves,if the banks increase the desired reserve ratio from 10 percent to 20 percent,the money multiplier

Accepted Answer

A) increases from 10 to 20. 
B) increases from 0.10 to 0.20. 
C) decreases from 10 to 5. 
D) decreases from 20 to 10. 
A) increases from 10 to 20. 
B) increases from 0.10 to 0.20. 
C) decreases from 10 to 5. 
D) decreases from 20 to 10.

Question 5

If the desired reserve ratio is 25 percent,the maximum money multiplier is

Accepted Answer

A) 1) 
B) 4) 
C) 8) 
D) 25. 
A) 1) 
B) 4) 
C) 8) 
D) 25.

Question 6

A decrease in the desired reserve ratio will

Accepted Answer

A) cause the money supply to decrease. 
B) cause the money supply to increase. 
C) not affect the money supply. 
D) decrease the money multiplier. 
A) cause the money supply to decrease. 
B) cause the money supply to increase. 
C) not affect the money supply. 
D) decrease the money multiplier.

Question 7

Goldsmiths were able to practice an early form of fractional reserve banking because they knew that

Accepted Answer

A) people were relatively unsophisticated in their financial transactions. 
B) gold was the major form of money. 
C) not all depositors would claim their gold at the same time. 
D) gold did not serve as a unit of account. 
A) people were relatively unsophisticated in their financial transactions. 
B) gold was the major form of money. 
C) not all depositors would claim their gold at the same time. 
D) gold did not serve as a unit of account.

Question 8

Would there be an increased moral hazard associated with deposit insurance if banks were allowed to do everything - sell insurance,shares and bonds,and airline tickets,plus everything else a bank does?

Accepted Answer

In general - no,since all of these items

Question 9

If the CDIC eliminated its insurance program for deposits,then

Accepted Answer

A) the banking system would probably fail. 
B) individual depositors would have more incentive to ascertain the soundness and solvency of the bank. 
C) banks would probably hold fewer reserves. 
D) moral hazard would be increased. 
A) the banking system would probably fail. 
B) individual depositors would have more incentive to ascertain the soundness and solvency of the bank. 
C) banks would probably hold fewer reserves. 
D) moral hazard would be increased.

Question 10

Table 13-3
  
-In Table 13-3,the desired reserve ratio for the entire banking system is

Accepted Answer

A) 20 percent. 
B) 10 percent. 
C) 15 percent. 
D) 1 percent. 
A) 20 percent. 
B) 10 percent. 
C) 15 percent. 
D) 1 percent.

Question 11

Excess reserves are defined as

Accepted Answer

A) actual reserves plus vault cash. 
B) actual reserves minus desired reserves. 
C) actual reserves minus vault cash. 
D) actual reserves plus desired reserves. 
A) actual reserves plus vault cash. 
B) actual reserves minus desired reserves. 
C) actual reserves minus vault cash. 
D) actual reserves plus desired reserves.

Question 12

The desired reserve requirement for commercial banks

Accepted Answer

A) is actually less than that needed to prevent a run on bank deposits. 
B) has a direct impact on how much money can be created from a new deposit. 
C) is set by the Prime Minister. 
D) is set by Parliament. 
A) is actually less than that needed to prevent a run on bank deposits. 
B) has a direct impact on how much money can be created from a new deposit. 
C) is set by the Prime Minister. 
D) is set by Parliament.

Question 13

Which of the following will limit the expansion of the money supply following a new deposit?

Accepted Answer

A) the bank's keeping no excess reserves 
B) a strong demand for new loans 
C) a redepositing of all loan proceeds 
D) a strong demand for holding currency outside of commercial banks 
A) the bank's keeping no excess reserves 
B) a strong demand for new loans 
C) a redepositing of all loan proceeds 
D) a strong demand for holding currency outside of commercial banks

Question 14

Which of the following actions has no effect on the total money supply?

Accepted Answer

A) the Bank of Canada buys government securities 
B) the Bank of Canada sells government securities 
C) a transfer of deposits from one bank to another bank 
D) change in the money multiplier 
A) the Bank of Canada buys government securities 
B) the Bank of Canada sells government securities 
C) a transfer of deposits from one bank to another bank 
D) change in the money multiplier

Question 15

Suppose a bank has $1,500,000 in deposits and the desired reserve ratio is 12 percent.If the bank is currently holding $200,000 in reserves,the excess reserves are equal to

Accepted Answer

A) zero. 
B) $40,000. 
C) $120,000. 
D) $20,000. 
A) zero. 
B) $40,000. 
C) $120,000. 
D) $20,000.

Question 16

Actual reserves are

Accepted Answer

A) stocks and bonds that depository institutions are desired by law to hold as reserves. 
B) anything that depository institutions are allowed to hold as reserves. 
C) the same thing as desired reserves. 
D) the percentage of total deposits that depository institutions are allowed to loan out. 
A) stocks and bonds that depository institutions are desired by law to hold as reserves. 
B) anything that depository institutions are allowed to hold as reserves. 
C) the same thing as desired reserves. 
D) the percentage of total deposits that depository institutions are allowed to loan out.

Question 17

The more people decide to hold currency,the

Accepted Answer

A) larger the actual money multiplier. 
B) smaller the actual money multiplier. 
C) larger the money supply. 
D) greater control the Bank of Canada has over the money supply. 
A) larger the actual money multiplier. 
B) smaller the actual money multiplier. 
C) larger the money supply. 
D) greater control the Bank of Canada has over the money supply.

Question 18

Currently,there are $10 million in excess reserves in the banking system.If the desired reserve ratio is 25 percent,the maximum amount the money supply can change is

Accepted Answer

A) $10 million. 
B) $50 million. 
C) $40 million. 
D) $25 million. 
A) $10 million. 
B) $50 million. 
C) $40 million. 
D) $25 million.

Question 19

Given a desired reserve ratio of 20 percent,a commercial bank which has received a new deposit of $100 can make additional loans of

Accepted Answer

A) $0. 
B) $20. 
C) $80. 
D) $400. 
A) $0. 
B) $20. 
C) $80. 
D) $400.

Question 20

The actual multiplier is often less than what one would calculate using the desired reserve ratio because

Accepted Answer

A) some loans earn more interest than other loans. 
B) people may keep cash and banks may keep excess reserves. 
C) there may already have been some excess reserves in the banking system. 
D) banks keep some of their desired reserves as vault cash. 
A) some loans earn more interest than other loans. 
B) people may keep cash and banks may keep excess reserves. 
C) there may already have been some excess reserves in the banking system. 
D) banks keep some of their desired reserves as vault cash.

What are reserves? Discuss the various types of reserves used in the Canadian banking system.

The actual change in the money supply equals

Changes in the money supply are important because

Assuming there are no excess reserves,if the banks increase the desired reserve ratio from 10 percent to 20 percent,the money multiplier

If the desired reserve ratio is 25 percent,the maximum money multiplier is

A decrease in the desired reserve ratio will

Goldsmiths were able to practice an early form of fractional reserve banking because they knew that

Would there be an increased moral hazard associated with deposit insurance if banks were allowed to do everything - sell insurance,shares and bonds,and airline tickets,plus everything else a bank does?

If the CDIC eliminated its insurance program for deposits,then

Table 13-3 -In Table 13-3,the desired reserve ratio for the entire banking system is

Excess reserves are defined as

The desired reserve requirement for commercial banks

Which of the following will limit the expansion of the money supply following a new deposit?

Which of the following actions has no effect on the total money supply?

Suppose a bank has $1,500,000 in deposits and the desired reserve ratio is 12 percent.If the bank is currently holding $200,000 in reserves,the excess reserves are equal to

Actual reserves are

The more people decide to hold currency,the

Currently,there are $10 million in excess reserves in the banking system.If the desired reserve ratio is 25 percent,the maximum amount the money supply can change is

Given a desired reserve ratio of 20 percent,a commercial bank which has received a new deposit of $100 can make additional loans of

The actual multiplier is often less than what one would calculate using the desired reserve ratio because

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

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Exam 13: Money Creation and Deposit Insurance

What are reserves? Discuss the various types of reserves used in the Canadian banking system.

The actual change in the money supply equals

Changes in the money supply are important because

Assuming there are no excess reserves,if the banks increase the desired reserve ratio from 10 percent to 20 percent,the money multiplier

If the desired reserve ratio is 25 percent,the maximum money multiplier is

A decrease in the desired reserve ratio will

Goldsmiths were able to practice an early form of fractional reserve banking because they knew that

Would there be an increased moral hazard associated with deposit insurance if banks were allowed to do everything - sell insurance,shares and bonds,and airline tickets,plus everything else a bank does?

If the CDIC eliminated its insurance program for deposits,then

Table 13-3 -In Table 13-3,the desired reserve ratio for the entire banking system is

Excess reserves are defined as

The desired reserve requirement for commercial banks

Which of the following will limit the expansion of the money supply following a new deposit?

Which of the following actions has no effect on the total money supply?

Suppose a bank has $1,500,000 in deposits and the desired reserve ratio is 12 percent.If the bank is currently holding $200,000 in reserves,the excess reserves are equal to

Actual reserves are

The more people decide to hold currency,the

Currently,there are $10 million in excess reserves in the banking system.If the desired reserve ratio is 25 percent,the maximum amount the money supply can change is

Given a desired reserve ratio of 20 percent,a commercial bank which has received a new deposit of $100 can make additional loans of

The actual multiplier is often less than what one would calculate using the desired reserve ratio because

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