Question 1

The smallest component of the money supply (M1)  is:

Accepted Answer

A)  currency.
B)  chequable deposits.
C)  small time deposits.
D)  large time deposits.E) A) and C)
F) A) and B)

Question 2

The cause of the skyrocketing mortgage default rates was:

Accepted Answer

A)  government programs that encouraged and subsidized home ownership for renters.
B)  declining real estate values.
C)  bad incentives provided by mortgage-backed bonds.
D)  all of the above.E) None of the above
F) B) and D)

Question 3

Refer to the information below.The maximum amount by which the chartered banking system can expand the supply of money by lending is about: Consolidated balance sheet for the chartered banking system.Assume the desired reserve ratio is 30 percent.All figures are in billions.

Accepted Answer

A)  $27 billion.
B)  $23.1 billion.
C)  $30 billion.
D)  $15 billion.E) A) and B)
F) A) and C)

Question 4

Refer to the above information.The value of the dollar in year 3 is:

Accepted Answer

A)  $1.00.
B)  $1.25.
C)  $.80.
D)  $.50.E) A) and D)
F) All of the above

Question 5

A chartered bank has desired reserve of $6000 and the reserve ratio is 20 percent.What are the chartered bank's demand-deposit liabilities?

Accepted Answer

A)  $1,200
B)  $9,000
C)  $30,000
D)  $120,000E) B) and D)
F) None of the above

Question 6

Refer to the information below.The monetary multiplier is: Consolidated balance sheet for the chartered banking system.All figures are in billions.Assume that the desired reserve ratio is 20 percent.

Accepted Answer

A)  4
B)  5
C)  8
D)  10E) All of the above
F) B) and C)

Question 7

Near money means:

Accepted Answer

A)  Money substitutes such as credit cards
B)  Chequing accounts
C)  They are not backed by gold
D)  They do not function as a medium of exchange but they serve as a store of valueE) All of the above
F) None of the above

Question 8

Currency and coins held by banks are part of the M1 definition of money supply.

Accepted Answer

A) True 
 B)False

Question 9

Suppose a chartered banking system has $100,000 of outstanding demand deposits and actual cash reserves of $35,000.If the desired reserve ratio is 20 percent, the banking system can expand the supply of money by the maximum amount of:

Accepted Answer

A)  $122,000
B)  $175,000
C)  $300,000
D)  $75,000E) A) and B)
F) None of the above

Question 10

A 15 percent increase in the price

Accepted Answer

A)  increases the value of a dollar by 15 percent.
B)  decreases the value of a dollar by about 13 percent.
C)  decreases the value of a dollar by 15 percent.
D)  decreases the value of a dollar by about 8 percent.E) A) and B)
F) A) and C)

Question 11

The chartered banking system can lend by a multiple of its excess reserves primarily because:

Accepted Answer

A)  its reserves are on deposit with the Bank of Canada
B)  its reserves are highly liquid assets.
C)  it loses reserves when it extends credit.
D)  its reserves are fractional.E) B) and C)
F) None of the above

Question 12

If we let P equal the price level expressed as an index number and D equal the value of the dollar, then we can say that:

Accepted Answer

A)  P = D - 1.
B)  D = 1/P.
C)  1 = D/P.
D)  D = P - 1.E) None of the above
F) All of the above

Question 13

Suppose a chartered bank has demand deposits of $500,000 and the desired reserve ratio is 10 percent.If the institution has excess reserves of $4,000, then its actual cash reserves are:

Accepted Answer

A)  $46,000
B)  $50,000
C)  $4,000
D)  $54,000E) B) and D)
F) A) and B)

Question 14

The two basic functions of the Canadian chartered banks and saving institutions are:

Accepted Answer

A)  making loans to the public and the federal government.
B)  holding the money deposits of businesses and households, and making loans to the public.
C)  holding the money deposits of businesses and households, and lending to the federal government.
D)  creating money and lending to the federal government.E) All of the above
F) B) and C)

Question 15

Fiat money is valuable because:

Accepted Answer

A)  it is backed by gold.
B)  it is fractionally backed by gold.
C)  it is generally acceptable.
D)  it is convertible to gold.E) A) and B)
F) B) and C)

Question 16

1.Foreign currency deposits of residents booked in Canada 2.Personal savings deposits at the chartered banks
3) Currency (coins and paper money) 
4) Demand deposits
5) Government securities
6) Non-personal notice deposits at the chartered banks
Refer to the above information.Which of the following is not included in any of the official definitions of money?

Accepted Answer

A)  item 1
B)  items 1 and 4
C)  no item
D)  item 5E) B) and C)
F) None of the above

Question 17

The desired reserve ratio refers to the ratio of a bank's:

Accepted Answer

A)  reserves to its liabilities and net worth.
B)  stock shares to its total assets.
C)  demand deposits to its total liabilities.
D)  specified percentage of deposit liabilities a chartered bank chooses to keep as vault cash.E) All of the above
F) None of the above

Question 18

If the desired reserve ratio is 10 percent, how much excess reserves does a bank acquire when a business deposits a $500 cheque drawn on another bank?

Accepted Answer

A)  $450
B)  $550
C)  $5000
D)  $500E) A) and B)
F) A) and C)

Question 19

Refer to the above information.The value of the dollar in year 4 is:

Accepted Answer

A)  $.25.
B)  $.33.
C)  $.50.
D)  $2.00.E) All of the above
F) A) and D)

Question 20

The banking system can lend by a multiple of its excess reserves because lending does not result in a loss of reserves to the banking system as a whole.

Accepted Answer

A) True 
 B)False

Exam 14: Part B: Money, Banking, and Money Creation

The desired reserve ratio refers to the ratio of a bank's:

Correct Answer
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The cause of the skyrocketing mortgage default rates was:

Correct Answer
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If the desired reserve ratio is 10 percent, how much excess reserves does a bank acquire when a business deposits a $500 cheque drawn on another bank?

Correct Answer
verified

Refer to the above information.The value of the dollar in year 4 is:

Correct Answer
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Correct Answer
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The two basic functions of the Canadian chartered banks and saving institutions are:

Correct Answer
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Refer to the information below.The monetary multiplier is: Consolidated balance sheet for the chartered banking system.All figures are in billions.Assume that the desired reserve ratio is 20 percent.

Correct Answer
verified

The smallest component of the money supply (M1) is:

Correct Answer
verified

Suppose a chartered banking system has $100,000 of outstanding demand deposits and actual cash reserves of $35,000.If the desired reserve ratio is 20 percent, the banking system can expand the supply of money by the maximum amount of:

Correct Answer
verified

Refer to the information below.The maximum amount by which the chartered banking system can expand the supply of money by lending is about: Consolidated balance sheet for the chartered banking system.Assume the desired reserve ratio is 30 percent.All figures are in billions.

Correct Answer
verified

Suppose a chartered bank has demand deposits of $500,000 and the desired reserve ratio is 10 percent.If the institution has excess reserves of $4,000, then its actual cash reserves are:

Correct Answer
verified

Refer to the above information.The value of the dollar in year 3 is:

Correct Answer
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Fiat money is valuable because:

Correct Answer
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A chartered bank has desired reserve of $6000 and the reserve ratio is 20 percent.What are the chartered bank's demand-deposit liabilities?

Correct Answer
verified

The banking system can lend by a multiple of its excess reserves because lending does not result in a loss of reserves to the banking system as a whole.

Correct Answer
verified

The chartered banking system can lend by a multiple of its excess reserves primarily because:

Correct Answer
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A 15 percent increase in the price

Correct Answer
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Near money means:

Correct Answer
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Currency and coins held by banks are part of the M1 definition of money supply.

Correct Answer
verified

If we let P equal the price level expressed as an index number and D equal the value of the dollar, then we can say that:

Correct Answer
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Exam 14: Part B: Money, Banking, and Money Creation

The desired reserve ratio refers to the ratio of a bank's:

Correct AnswerverifiedShow Answer

The cause of the skyrocketing mortgage default rates was:

Correct AnswerverifiedShow Answer

If the desired reserve ratio is 10 percent, how much excess reserves does a bank acquire when a business deposits a $500 cheque drawn on another bank?

Correct AnswerverifiedShow Answer

Refer to the above information.The value of the dollar in year 4 is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The two basic functions of the Canadian chartered banks and saving institutions are:

Correct AnswerverifiedShow Answer

Refer to the information below.The monetary multiplier is: Consolidated balance sheet for the chartered banking system.All figures are in billions.Assume that the desired reserve ratio is 20 percent.

Correct AnswerverifiedShow Answer

The smallest component of the money supply (M1) is:

Correct AnswerverifiedShow Answer

Suppose a chartered banking system has $100,000 of outstanding demand deposits and actual cash reserves of $35,000.If the desired reserve ratio is 20 percent, the banking system can expand the supply of money by the maximum amount of:

Correct AnswerverifiedShow Answer

Refer to the information below.The maximum amount by which the chartered banking system can expand the supply of money by lending is about: Consolidated balance sheet for the chartered banking system.Assume the desired reserve ratio is 30 percent.All figures are in billions.

Correct AnswerverifiedShow Answer

Suppose a chartered bank has demand deposits of $500,000 and the desired reserve ratio is 10 percent.If the institution has excess reserves of $4,000, then its actual cash reserves are:

Correct AnswerverifiedShow Answer

Refer to the above information.The value of the dollar in year 3 is:

Correct AnswerverifiedShow Answer

Fiat money is valuable because:

Correct AnswerverifiedShow Answer

A chartered bank has desired reserve of $6000 and the reserve ratio is 20 percent.What are the chartered bank's demand-deposit liabilities?

Correct AnswerverifiedShow Answer

The banking system can lend by a multiple of its excess reserves because lending does not result in a loss of reserves to the banking system as a whole.

Correct AnswerverifiedShow Answer

The chartered banking system can lend by a multiple of its excess reserves primarily because:

Correct AnswerverifiedShow Answer

A 15 percent increase in the price

Correct AnswerverifiedShow Answer

Near money means:

Correct AnswerverifiedShow Answer

Currency and coins held by banks are part of the M1 definition of money supply.

Correct AnswerverifiedShow Answer

If we let P equal the price level expressed as an index number and D equal the value of the dollar, then we can say that:

Correct AnswerverifiedShow Answer

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