Question 1

The transactions demand for money will increase when

Accepted Answer

A) the rate of interest increases. 
B) the price level falls. 
C) national income increases. 
D) national income decreases. 
A) the rate of interest increases. 
B) the price level falls. 
C) national income increases. 
D) national income decreases.

Question 2

To increase the money supply

Accepted Answer

A) the Bank of Canada should sell government securities. 
B) the commercial banks should reduce their loans. 
C) the Bank of Canada should buy government securities from commercial banks. 
D) the Bank of Canada should increase reserve requirements. 
A) the Bank of Canada should sell government securities. 
B) the commercial banks should reduce their loans. 
C) the Bank of Canada should buy government securities from commercial banks. 
D) the Bank of Canada should increase reserve requirements.

Question 3

What are the functions of the Bank of Canada?

Accepted Answer

The Bank of Canada serves four basic fun

Question 4

The transactions demand for money

Accepted Answer

A) varies directly with nominal national income. 
B) varies inversely with nominal national income. 
C) varies inversely with real national income. 
D) has no relationship with nominal or real national income. 
A) varies directly with nominal national income. 
B) varies inversely with nominal national income. 
C) varies inversely with real national income. 
D) has no relationship with nominal or real national income.

Question 5

A person is preparing for a long automobile trip and cashes in a CD for cash in case of emergencies along the way.This is an example of the

Accepted Answer

A) transaction demand for money. 
B) precautionary demand for money. 
C) wealth demand for money. 
D) asset demand for money. 
A) transaction demand for money. 
B) precautionary demand for money. 
C) wealth demand for money. 
D) asset demand for money.

Question 6

According to the quantity theory of money,any change in the price level may be explained by changes in the

Accepted Answer

A) prime rate. 
B) real interest rate. 
C) money supply. 
D) velocity of money. 
A) prime rate. 
B) real interest rate. 
C) money supply. 
D) velocity of money.

Question 7

The velocity of money

Accepted Answer

A) is calculated as P/M. 
B) indicates the number of times per year a dollar is spent on final goods and services. 
C) is equal to 2k in the Cambridge equation. 
D) indicates the speed with which the Canadian Treasury can mint new currency. 
A) is calculated as P/M. 
B) indicates the number of times per year a dollar is spent on final goods and services. 
C) is equal to 2k in the Cambridge equation. 
D) indicates the speed with which the Canadian Treasury can mint new currency.

Question 8

If the quantity of output is 200 billion units,actual money balances held by the nonbanking public equals $100 billion and the average price is $20 per unit of national output,then velocity is

Accepted Answer

A) 10. 
B) 20. 
C) 40. 
D) 50. 
A) 10. 
B) 20. 
C) 40. 
D) 50.

Question 9

An appreciation of the dollar is usually a sign that

Accepted Answer

A) the Bank of Canada is pursuing an expansionary monetary policy. 
B) Canadian interest rates have increased. 
C) Canadian bond prices have increased. 
D) real national income in Canada is increasing. 
A) the Bank of Canada is pursuing an expansionary monetary policy. 
B) Canadian interest rates have increased. 
C) Canadian bond prices have increased. 
D) real national income in Canada is increasing.

Question 10

One of the economic costs of holding currency is that

Accepted Answer

A) it is cumbersome to carry. 
B) it requires constant attention. 
C) it earns no interest income. 
D) its real value always increases. 
A) it is cumbersome to carry. 
B) it requires constant attention. 
C) it earns no interest income. 
D) its real value always increases.

Question 11

As nominal national income rises,the transactions demand for money

Accepted Answer

A) increases and the money demand curve shifts to the left. 
B) decreases and the money demand curve shifts to the left. 
C) increases and the money demand curve shifts to the right. 
D) remains constant and the money demand curve remains the same. 
A) increases and the money demand curve shifts to the left. 
B) decreases and the money demand curve shifts to the left. 
C) increases and the money demand curve shifts to the right. 
D) remains constant and the money demand curve remains the same.

Question 12

With respect to the nation's money supply,the Bank of Canada

Accepted Answer

A) has no ability to influence its magnitude or its rate of growth. 
B) precisely sets the amount of money in circulation in consultation with Parliament. 
C) can influence its future growth. 
D) has disavowed any intention to influence the money supply. 
A) has no ability to influence its magnitude or its rate of growth. 
B) precisely sets the amount of money in circulation in consultation with Parliament. 
C) can influence its future growth. 
D) has disavowed any intention to influence the money supply.

Question 13

The equation of exchange is

Accepted Answer

A) M = Q. 
B) M = VPQ. 
C) MV = PQ. 
D) M/P = Q. 
A) M = Q. 
B) M = VPQ. 
C) MV = PQ. 
D) M/P = Q.

Question 14

Figure 14-5  
-In Figure 14-5,if the economy is in equilibrium at E₁,then

Accepted Answer

A) the economy is underutilizing its resources. 
B) the economy is producing above its potential long run equilibrium at full employment. 
C) there is an expansionary gap in the economy. 
D) the economy is in a period of high inflation. 
A) the economy is underutilizing its resources. 
B) the economy is producing above its potential long run equilibrium at full employment. 
C) there is an expansionary gap in the economy. 
D) the economy is in a period of high inflation.

Question 15

The desire by households to hold a certain amount of money as a store of value,rather to hold assets such as certificates of deposit,stocks,and bonds,results in the

Accepted Answer

A) liquidity demand. 
B) transactions demand. 
C) precautionary demand. 
D) asset demand. 
A) liquidity demand. 
B) transactions demand. 
C) precautionary demand. 
D) asset demand.

Question 16

Suppose the economy is operating below its full employment level.By using an expansionary monetary policy,the Bank of Canada can

Accepted Answer

A) raise real national income without increasing the price level. 
B) raise real national income and the price level. 
C) raise real national income and decrease the price level. 
D) raise the price level alone,but cannot increase real national income. 
A) raise real national income without increasing the price level. 
B) raise real national income and the price level. 
C) raise real national income and decrease the price level. 
D) raise the price level alone,but cannot increase real national income.

Question 17

The initial impact of the Bank of Canada's open market sale of government securities to commercial banks is

Accepted Answer

A) an increase in the money supply by some multiple of the dollar volume of the sale. 
B) an increase in commercial bank deposits at the Bank of Canada. 
C) a fall in the money supply by some multiple of the dollar volume of the sale. 
D) a reduction of the commercial banking system's reserve deposits at the Bank of Canada. 
A) an increase in the money supply by some multiple of the dollar volume of the sale. 
B) an increase in commercial bank deposits at the Bank of Canada. 
C) a fall in the money supply by some multiple of the dollar volume of the sale. 
D) a reduction of the commercial banking system's reserve deposits at the Bank of Canada.

Question 18

A tight monetary policy might cause

Accepted Answer

A) an increase in net exports. 
B) a depreciation of the dollar. 
C) a deterioration of the international trade balance. 
D) other countries to pursue an expansionary monetary policy. 
A) an increase in net exports. 
B) a depreciation of the dollar. 
C) a deterioration of the international trade balance. 
D) other countries to pursue an expansionary monetary policy.

Question 19

An increase in the supply of money,other things constant,

Accepted Answer

A) stimulates an increase in demand for money. 
B) reduces the purchasing power of money. 
C) reduces the rate of growth of the price level. 
D) generates significant changes in relative prices. 
A) stimulates an increase in demand for money. 
B) reduces the purchasing power of money. 
C) reduces the rate of growth of the price level. 
D) generates significant changes in relative prices.

Question 20

Describe with the aid of diagrams the effect of an increase in the money supply on interest rates and in turn aggregate demand and the price level.

Accepted Answer

A graph as per figure 14-5 in the text w

The transactions demand for money will increase when

To increase the money supply

What are the functions of the Bank of Canada?

The transactions demand for money

A person is preparing for a long automobile trip and cashes in a CD for cash in case of emergencies along the way.This is an example of the

According to the quantity theory of money,any change in the price level may be explained by changes in the

The velocity of money

If the quantity of output is 200 billion units,actual money balances held by the nonbanking public equals $100 billion and the average price is $20 per unit of national output,then velocity is

An appreciation of the dollar is usually a sign that

One of the economic costs of holding currency is that

As nominal national income rises,the transactions demand for money

With respect to the nation's money supply,the Bank of Canada

The equation of exchange is

Figure 14-5 -In Figure 14-5,if the economy is in equilibrium at E₁,then

The desire by households to hold a certain amount of money as a store of value,rather to hold assets such as certificates of deposit,stocks,and bonds,results in the

Suppose the economy is operating below its full employment level.By using an expansionary monetary policy,the Bank of Canada can

The initial impact of the Bank of Canada's open market sale of government securities to commercial banks is

A tight monetary policy might cause

An increase in the supply of money,other things constant,

Describe with the aid of diagrams the effect of an increase in the money supply on interest rates and in turn aggregate demand and the price level.

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

Money Creation and Deposit Insurance

Issues in Stabilization Policy

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 14: The Bank of Canada and Monetary Policy

The transactions demand for money will increase when

To increase the money supply

What are the functions of the Bank of Canada?

The transactions demand for money

A person is preparing for a long automobile trip and cashes in a CD for cash in case of emergencies along the way.This is an example of the

According to the quantity theory of money,any change in the price level may be explained by changes in the

The velocity of money

If the quantity of output is 200 billion units,actual money balances held by the nonbanking public equals $100 billion and the average price is $20 per unit of national output,then velocity is

An appreciation of the dollar is usually a sign that

One of the economic costs of holding currency is that

As nominal national income rises,the transactions demand for money

With respect to the nation's money supply,the Bank of Canada

The equation of exchange is

Figure 14-5 -In Figure 14-5,if the economy is in equilibrium at E₁,then

The desire by households to hold a certain amount of money as a store of value,rather to hold assets such as certificates of deposit,stocks,and bonds,results in the

Suppose the economy is operating below its full employment level.By using an expansionary monetary policy,the Bank of Canada can

The initial impact of the Bank of Canada's open market sale of government securities to commercial banks is

A tight monetary policy might cause

An increase in the supply of money,other things constant,

Describe with the aid of diagrams the effect of an increase in the money supply on interest rates and in turn aggregate demand and the price level.

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

Money Creation and Deposit Insurance

Issues in Stabilization Policy

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters