Question 1

The equation of exchange is

Accepted Answer

A) a major tool of fiscal policy. 
B) true in the short run but not always in the long run. 
C) an accounting identity,and therefore always true. 
D) a theory associated with John Meynard Keynes. 
A) a major tool of fiscal policy. 
B) true in the short run but not always in the long run. 
C) an accounting identity,and therefore always true. 
D) a theory associated with John Meynard Keynes.

Question 2

The desired reserve ratio is 10 percent but banks have decided they want to keep 20 percent of deposits as reserves.There are no currency drains.If the Bank of Canada buys $1 million of government securities,the money supply will

Accepted Answer

A) not change because of the excess reserves banks keep on hand. 
B) increase by $1 million. 
C) increase by $5 million. 
D) increase by $10 million. 
A) not change because of the excess reserves banks keep on hand. 
B) increase by $1 million. 
C) increase by $5 million. 
D) increase by $10 million.

Question 3

Assume that desired reserves are 20 percent.If the Bank of Canada buys $1,000 worth of bonds from a member bank,then the banking system can

Accepted Answer

A) increase loans by a maximum of $5,000. 
B) increase loans by a maximum of $4,000. 
C) decrease loans by a maximum of $5,000. 
D) decrease loans by a maximum of $4,000. 
A) increase loans by a maximum of $5,000. 
B) increase loans by a maximum of $4,000. 
C) decrease loans by a maximum of $5,000. 
D) decrease loans by a maximum of $4,000.

Question 4

Other things constant,the crude quantity theory of money suggests that any increase in the money supply

Accepted Answer

A) causes a reduction in the demand for money. 
B) results in a decrease in the aggregate price level. 
C) causes the aggregate level of nominal income to fall. 
D) results in a proportional increase in the price level. 
A) causes a reduction in the demand for money. 
B) results in a decrease in the aggregate price level. 
C) causes the aggregate level of nominal income to fall. 
D) results in a proportional increase in the price level.

Question 5

The Bank of Canada accepts deposits from

Accepted Answer

A) the general public. 
B) chartered banks only. 
C) the Bank of Canada and chartered banks. 
D) the Board of Directors. 
A) the general public. 
B) chartered banks only. 
C) the Bank of Canada and chartered banks. 
D) the Board of Directors.

Question 6

Currently there are zero excess reserves in the Canadian banking system.If the required reserve ratio is 20 percent and the Bank of Canada sells 20 million in bonds,the maximum amount that the money supply can change is

Accepted Answer

A) $20 million. 
B) $40 million. 
C) $100 million. 
D) $400 million. 
A) $20 million. 
B) $40 million. 
C) $100 million. 
D) $400 million.

Question 7

Figure 14-3  
-In Figure 14-3,assume the economy starts at an equilibrium at point d.If the Bank of Canada increases the money supply so that the new aggregate demand curve is AD₃,then the long run equilibrium will be at point

Accepted Answer

A) a) 
B) b) 
C) c) 
D) i) 
A) a) 
B) b) 
C) c) 
D) i)

Question 8

The transactions demand for money

Accepted Answer

A) varies inversely with the velocity of money. 
B) varies directly with the rate of interest. 
C) is a function of national income. 
D) is determined by the Bank of Canada. 
A) varies inversely with the velocity of money. 
B) varies directly with the rate of interest. 
C) is a function of national income. 
D) is determined by the Bank of Canada.

Question 9

The number of times per year a dollar is spent is known as

Accepted Answer

A) the money supply. 
B) the equation of exchange. 
C) the price of money. 
D) the income velocity of money. 
A) the money supply. 
B) the equation of exchange. 
C) the price of money. 
D) the income velocity of money.

Question 10

According to the equation of exchange,if M = $400,P = $8,and Q = $200,then

Accepted Answer

A) NNP is $800. 
B) V is 4. 
C) the price level must fall. 
D) V cannot be determined. 
A) NNP is $800. 
B) V is 4. 
C) the price level must fall. 
D) V cannot be determined.

Question 11

As the world economy becomes more integrated,

Accepted Answer

A) the Bank of Canada will find it easier to conduct monetary policy. 
B) the Bank of Canada will have a more difficult time reaching its money supply growth rate targets. 
C) the Bank of Canada will rely less on open market operations and more on changing the desired reserve ratio when conducting monetary policy. 
D) Canadian interest rates will determine world interest rates. 
A) the Bank of Canada will find it easier to conduct monetary policy. 
B) the Bank of Canada will have a more difficult time reaching its money supply growth rate targets. 
C) the Bank of Canada will rely less on open market operations and more on changing the desired reserve ratio when conducting monetary policy. 
D) Canadian interest rates will determine world interest rates.

The equation of exchange is

The desired reserve ratio is 10 percent but banks have decided they want to keep 20 percent of deposits as reserves.There are no currency drains.If the Bank of Canada buys $1 million of government securities,the money supply will

Assume that desired reserves are 20 percent.If the Bank of Canada buys $1,000 worth of bonds from a member bank,then the banking system can

Other things constant,the crude quantity theory of money suggests that any increase in the money supply

The Bank of Canada accepts deposits from

Currently there are zero excess reserves in the Canadian banking system.If the required reserve ratio is 20 percent and the Bank of Canada sells 20 million in bonds,the maximum amount that the money supply can change is

Figure 14-3 -In Figure 14-3,assume the economy starts at an equilibrium at point d.If the Bank of Canada increases the money supply so that the new aggregate demand curve is AD₃,then the long run equilibrium will be at point

The transactions demand for money

The number of times per year a dollar is spent is known as

According to the equation of exchange,if M = $400,P = $8,and Q = $200,then

As the world economy becomes more integrated,

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 equation of exchange is

The desired reserve ratio is 10 percent but banks have decided they want to keep 20 percent of deposits as reserves.There are no currency drains.If the Bank of Canada buys $1 million of government securities,the money supply will

Assume that desired reserves are 20 percent.If the Bank of Canada buys $1,000 worth of bonds from a member bank,then the banking system can

Other things constant,the crude quantity theory of money suggests that any increase in the money supply

The Bank of Canada accepts deposits from

Currently there are zero excess reserves in the Canadian banking system.If the required reserve ratio is 20 percent and the Bank of Canada sells 20 million in bonds,the maximum amount that the money supply can change is

Figure 14-3 -In Figure 14-3,assume the economy starts at an equilibrium at point d.If the Bank of Canada increases the money supply so that the new aggregate demand curve is AD₃,then the long run equilibrium will be at point

The transactions demand for money

The number of times per year a dollar is spent is known as

According to the equation of exchange,if M = $400,P = $8,and Q = $200,then

As the world economy becomes more integrated,

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