Question 1

Nominal GDP is output measured in ________ prices while real GDP is output measured in ________ prices.

Accepted Answer

A)  current; current
B)  current; fixed
C)  fixed; fixed
D)  fixed; current B

Question 2

The price of one country's currency in terms of another country's currency is called the ________.

Accepted Answer

A)  foreign exchange rate
B)  interest rate
C)  TSE index
D)  inflation rate A

Question 3

From 2002-2011, the dollar strengthened in value against other currencies. Who was helped and who was hurt by this strong dollar?

Accepted Answer

Canadian consumers benefitted because imports were cheaper and consumers could purchase more. Canadian businesses and workers in those businesses were hurt as domestic and foreign sales of Canadian products fell.

Question 4

A key factor in producing high economic growth is ________.

Accepted Answer

A)  eliminating foreign trade
B)  well-functioning financial markets
C)  high interest rates
D)  stock market volatility

Question 5

________ policy involves decisions about government spending and taxation.

Accepted Answer

A)  Monetary
B)  Fiscal
C)  Risk Management
D)  Systemic

Question 6

The upward and downward movement of aggregate output produced in the economy is referred to as the ________.

Accepted Answer

A)  roller coaster
B)  see saw
C)  business cycle
D)  shock wave

Question 7

The average price of goods and services in the economy is called ________.

Accepted Answer

A)  the aggregate price level
B)  inflation
C)  interest rates
D)  deflation

Question 8

Chartered banks, trust and mortgage loan companies, and credit unions and caisses populaires ________.

Accepted Answer

A)  no longer provide financial intermediation
B)  since deregulation now provide services only to small depositors
C)  accept deposits and make loans
D)  create fluctuations in the stock market

Question 9

Banks ________.

Accepted Answer

A)  are the smallest of the financial intermediaries
B)  are the largest financial intermediaries
C)  are barred from providing financial intermediation services
D)  can only provide services to corporations

Question 10

Everything else held constant, an increase in interest rates on student loans ________.

Accepted Answer

A)  may increase the cost of education
B)  may reduce the cost of education
C)  has no effect on educational costs
D)  increases costs for students with no loans

Question 11

When in 1985 a British pound cost approximately C$1.30, a Shetland sweater that cost 100 British pounds would have cost $130. With a weaker Canadian dollar, the same Shetland sweater would have cost ________.

Accepted Answer

A)  less than $130
B)  more than $130
C)  $130, since the exchange rate does not affect the prices that Canadian consumers pay for foreign goods
D)  $130, since the demand for Shetland sweaters will decrease to prevent an increase in price due to the stronger dollar

Question 12

During a recession, output declines resulting in ________.

Accepted Answer

A)  lower unemployment in the economy
B)  higher unemployment in the economy
C)  no impact on the unemployment in the economy
D)  higher wages for the workers

Question 13

Which of the following is a true statement?

Accepted Answer

A)  Money or the money supply is defined as Bank of Canada notes.
B)  The average price of goods and services in an economy is called the aggregate price level.
C)  The inflation rate is measured as the rate of change in the federal government budget deficit.
D)  The aggregate price level is measured as the rate of change in the inflation rate.

Question 14

A financial crisis is ________.

Accepted Answer

A)  not possible in the modern financial environment
B)  a major disruption in the financial markets
C)  a feature of developing economies only
D)  typically followed by an economic boom

Question 15

Bonds of different maturities ________.

Accepted Answer

A)  show no common features
B)  have interest rates that tend to move together
C)  have interest rates that can differ substantially
D)  B and C only

Question 16

Countries that experience very high rates of inflation may also have ________.

Accepted Answer

A)  balanced budgets
B)  rapidly growing money supplies
C)  falling money supplies
D)  constant money supplies

Question 17

From 2002 to 2011, the Canadian dollar ________ in value.

Accepted Answer

A)  appreciated by approximately 25%
B)  appreciated by approximately 50%
C)  depreciated by approximately 50%
D)  depreciated by approximately 25%

Question 18

Financial institutions that accept deposits and make loans include ________.

Accepted Answer

A)  exchanges
B)  banks
C)  over-the-counter markets
D)  finance companies

Question 19

What is a stock? How do stocks affect the economy?

Accepted Answer

The answer of What is a stock? How do stocks...

Question 20

If the Canadian dollar price of a euro increases from $1.00 to $1.10, then, everything else held constant, ________.

Accepted Answer

A)  a European vacation becomes less expensive
B)  a European vacation becomes more expensive
C)  the cost of a European vacation is not affected
D)  foreign travel becomes impossible

Exam 1: Why Study Money, Banking, and Financial Markets

Nominal GDP is output measured in prices while real GDP is output measured in prices.