Question 1

Following a new deposit of $50 when the desired reserve ratio is 10 percent,the maximum increase in the assets of commercial banks will be

Accepted Answer

A) $50. 
B) $400. 
C) $500. 
D) $40,000. 
A) $50. 
B) $400. 
C) $500. 
D) $40,000.

Question 2

A bank with deposits of $200 million keeps $20 million in cash in its vault,$15 million of deposits at the Bank of Canada,and $10 million in government securities.The desired reserve requirement is 15 percent.The bank has excess reserves of

Accepted Answer

A) 0) 
B) $5 million. 
C) $15 million. 
D) $20 million. 
A) 0) 
B) $5 million. 
C) $15 million. 
D) $20 million.

Question 3

Desired reserves consist of

Accepted Answer

A) deposits in the Bank of Canada plus vault currency cash. 
B) deposits in the Bank of Canada only. 
C) vault cash only. 
D) savings and chequing accounts only. 
A) deposits in the Bank of Canada plus vault currency cash. 
B) deposits in the Bank of Canada only. 
C) vault cash only. 
D) savings and chequing accounts only.

Question 4

Table 13-3
  
-In Table 13-3,the money multiplier for the banking system is

Accepted Answer

A) 5) 
B) 9) 
C) 1) 
D) 10. 
A) 5) 
B) 9) 
C) 1) 
D) 10.

Question 5

Following a new deposit of $200,a commercial bank subject to a 15 percent desired reserve ratio will have what eventual change to its balance sheet?

Accepted Answer

A) increases in reserves of $30,in loans of $170,and in demand deposits of $200 
B) increases in loans of $200 and in demand deposits of $200 
C) increases in loans of $850,in reserves of $150 and in deposits of $1000 
D) increases in reserves of $170,in demand deposits of $200 and in net worth of $30 
A) increases in reserves of $30,in loans of $170,and in demand deposits of $200 
B) increases in loans of $200 and in demand deposits of $200 
C) increases in loans of $850,in reserves of $150 and in deposits of $1000 
D) increases in reserves of $170,in demand deposits of $200 and in net worth of $30

Question 6

The more excess reserves banks decide to keep,then

Accepted Answer

A) the smaller the money multiplier. 
B) the greater the money supply. 
C) the greater the money multiplier. 
D) the greater the currency drain. 
A) the smaller the money multiplier. 
B) the greater the money supply. 
C) the greater the money multiplier. 
D) the greater the currency drain.

Question 7

Explain how a currency drain affects the size of the money multiplier.In your explanation,suppose that a bank gains $1 million in new deposits and reserves.Further suppose that the desired reserve ratio is 10 percent and the currency drain is 33.33 percent.

Accepted Answer

A currency drain decreases the size of t

Question 8

Table 13-1
  
-According to Table 13-1,the desired reserve ratio for the ABC Bank is

Accepted Answer

A) 5 percent. 
B) 15 percent. 
C) 20 percent. 
D) 10 percent. 
A) 5 percent. 
B) 15 percent. 
C) 20 percent. 
D) 10 percent.

Question 9

Table 13-1
  
-In Table 13-1,suppose that $20,000 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) $21,000. 
D) $8,000. 
A) $17,000. 
B) $15,000. 
C) $21,000. 
D) $8,000.

Question 10

Table 13-2
  
-In Table 13-2,if excess reserves for XYZ Bank are $30,000,the desired reserve ratio

Accepted Answer

A) is 20 percent. 
B) is 17 percent. 
C) is 30 percent. 
D) cannot be determined without more information. 
A) is 20 percent. 
B) is 17 percent. 
C) is 30 percent. 
D) cannot be determined without more information.

Question 11

A bank currently has $50 million in deposits,$6 million in cash in the vault,$4 million on deposit with the Bank of Canada,and $5 million in government securities.The required reserve ratio is 20 percent.A new deposit is made of $1 million.What is the maximum size loan the bank can now make?

Accepted Answer

A) 0 
B) $800,000 
C) $1 million 
D) $5.8 million 
A) 0 
B) $800,000 
C) $1 million 
D) $5.8 million

Question 12

The Canadian Deposit Insurance Corporation insures

Accepted Answer

A) banks against lawsuits. 
B) the federal funds market. 
C) the deposits held in member banks. 
D) the deposits held in the Bank of Canada. 
A) banks against lawsuits. 
B) the federal funds market. 
C) the deposits held in member banks. 
D) the deposits held in the Bank of Canada.

Question 13

Following a new deposit of $500,the loans of a commercial bank increase by $400.In this situation,the desired reserve ratio is most likely

Accepted Answer

A) 0 percent. 
B) 20 percent. 
C) 80 percent. 
D) 180 percent. 
A) 0 percent. 
B) 20 percent. 
C) 80 percent. 
D) 180 percent.

Question 14

Comment on deposit insurance and flawed bank regulation.

Accepted Answer

1.Discussion of the CDIC.
2.Th

Question 15

The reason that the commercial banking system can generate a multiple expansion or contraction of the money supply is that

Accepted Answer

A) banks desire to hold only a fraction of their deposit liabilities as reserves. 
B) most banks maintain a relatively large stock of excess reserves. 
C) banks hold reserves equal to their net worth. 
D) banks generally have surplus funds on deposit with other banks. 
A) banks desire to hold only a fraction of their deposit liabilities as reserves. 
B) most banks maintain a relatively large stock of excess reserves. 
C) banks hold reserves equal to their net worth. 
D) banks generally have surplus funds on deposit with other banks.

Question 16

If there are zero excess reserves in the Canadian banking system and the Bank of Canada raises the required reserve ratio from 10 percent to 20 percent,then

Accepted Answer

A) the money supply will double. 
B) the money supply will be unaffected. 
C) required reserves double and the money supply must decrease by this amount times 5. 
D) required reserves double and the money supply must decrease by this amount times 10. 
A) the money supply will double. 
B) the money supply will be unaffected. 
C) required reserves double and the money supply must decrease by this amount times 5. 
D) required reserves double and the money supply must decrease by this amount times 10.

Question 17

Table 13-4
  
-In Table 13-4,the Bank of Wealth can make additional loans up to

Accepted Answer

A) $25,000. 
B) $10,000. 
C) $5,000. 
D) $250,000. 
A) $25,000. 
B) $10,000. 
C) $5,000. 
D) $250,000.

Question 18

Banks have an incentive to

Accepted Answer

A) minimize excess reserves because the bank has to pay a fee to the Bank of Canada for holding excess reserves. 
B) minimize excess reserves because reserves produce no income. 
C) hold substantial excess reserves in case there is an unexpectedly heavy demand for withdrawals. 
D) hold substantial excess reserves because the bank's profits come from excess reserves. 
A) minimize excess reserves because the bank has to pay a fee to the Bank of Canada for holding excess reserves. 
B) minimize excess reserves because reserves produce no income. 
C) hold substantial excess reserves in case there is an unexpectedly heavy demand for withdrawals. 
D) hold substantial excess reserves because the bank's profits come from excess reserves.

Question 19

If depository insurance exists,bank managers may make riskier loans than they would have otherwise,which is an example of

Accepted Answer

A) regulatory lag. 
B) irrational behaviour. 
C) moral hazard. 
D) adverse selection. 
A) regulatory lag. 
B) irrational behaviour. 
C) moral hazard. 
D) adverse selection.

Question 20

Table 13-4
  
-In Table 13-4,if a customer withdrew $10,000 the bank would

Accepted Answer

A) have to borrow money to meet the desired reserve ratio. 
B) have excess reserves of $5,000. 
C) have zero excess reserves. 
D) have $1,000 in excess reserves. 
A) have to borrow money to meet the desired reserve ratio. 
B) have excess reserves of $5,000. 
C) have zero excess reserves. 
D) have $1,000 in excess reserves.

Following a new deposit of $50 when the desired reserve ratio is 10 percent,the maximum increase in the assets of commercial banks will be

A bank with deposits of $200 million keeps $20 million in cash in its vault,$15 million of deposits at the Bank of Canada,and $10 million in government securities.The desired reserve requirement is 15 percent.The bank has excess reserves of

Desired reserves consist of

Table 13-3 -In Table 13-3,the money multiplier for the banking system is

Following a new deposit of $200,a commercial bank subject to a 15 percent desired reserve ratio will have what eventual change to its balance sheet?

The more excess reserves banks decide to keep,then

Explain how a currency drain affects the size of the money multiplier.In your explanation,suppose that a bank gains $1 million in new deposits and reserves.Further suppose that the desired reserve ratio is 10 percent and the currency drain is 33.33 percent.

Table 13-1 -According to Table 13-1,the desired reserve ratio for the ABC Bank is

Table 13-1 -In Table 13-1,suppose that $20,000 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 13-2 -In Table 13-2,if excess reserves for XYZ Bank are $30,000,the desired reserve ratio

A bank currently has $50 million in deposits,$6 million in cash in the vault,$4 million on deposit with the Bank of Canada,and $5 million in government securities.The required reserve ratio is 20 percent.A new deposit is made of $1 million.What is the maximum size loan the bank can now make?

The Canadian Deposit Insurance Corporation insures

Following a new deposit of $500,the loans of a commercial bank increase by $400.In this situation,the desired reserve ratio is most likely

Comment on deposit insurance and flawed bank regulation.

The reason that the commercial banking system can generate a multiple expansion or contraction of the money supply is that

If there are zero excess reserves in the Canadian banking system and the Bank of Canada raises the required reserve ratio from 10 percent to 20 percent,then

Table 13-4 -In Table 13-4,the Bank of Wealth can make additional loans up to

Banks have an incentive to

If depository insurance exists,bank managers may make riskier loans than they would have otherwise,which is an example of

Table 13-4 -In Table 13-4,if a customer withdrew $10,000 the bank would

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

Following a new deposit of $50 when the desired reserve ratio is 10 percent,the maximum increase in the assets of commercial banks will be

A bank with deposits of $200 million keeps $20 million in cash in its vault,$15 million of deposits at the Bank of Canada,and $10 million in government securities.The desired reserve requirement is 15 percent.The bank has excess reserves of

Desired reserves consist of

Table 13-3 -In Table 13-3,the money multiplier for the banking system is

Following a new deposit of $200,a commercial bank subject to a 15 percent desired reserve ratio will have what eventual change to its balance sheet?

The more excess reserves banks decide to keep,then

Explain how a currency drain affects the size of the money multiplier.In your explanation,suppose that a bank gains $1 million in new deposits and reserves.Further suppose that the desired reserve ratio is 10 percent and the currency drain is 33.33 percent.

Table 13-1 -According to Table 13-1,the desired reserve ratio for the ABC Bank is

Table 13-1 -In Table 13-1,suppose that $20,000 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 13-2 -In Table 13-2,if excess reserves for XYZ Bank are $30,000,the desired reserve ratio

A bank currently has $50 million in deposits,$6 million in cash in the vault,$4 million on deposit with the Bank of Canada,and $5 million in government securities.The required reserve ratio is 20 percent.A new deposit is made of $1 million.What is the maximum size loan the bank can now make?

The Canadian Deposit Insurance Corporation insures

Following a new deposit of $500,the loans of a commercial bank increase by $400.In this situation,the desired reserve ratio is most likely

Comment on deposit insurance and flawed bank regulation.

The reason that the commercial banking system can generate a multiple expansion or contraction of the money supply is that

If there are zero excess reserves in the Canadian banking system and the Bank of Canada raises the required reserve ratio from 10 percent to 20 percent,then

Table 13-4 -In Table 13-4,the Bank of Wealth can make additional loans up to

Banks have an incentive to

If depository insurance exists,bank managers may make riskier loans than they would have otherwise,which is an example of

Table 13-4 -In Table 13-4,if a customer withdrew $10,000 the bank would

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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