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Which of the following does the Bank of Canada NOT do?


A) control the supply of money
B) control the value of money
C) make loans to individuals
D) regulate the banking system

E) C) and D)
F) A) and C)

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Which of the following is current Canadian currency?


A) fiat money with intrinsic value
B) fiat money with no intrinsic value
C) commodity money with intrinsic value
D) commodity money with no intrinsic value

E) B) and D)
F) All of the above

Correct Answer

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Which of the following is a characteristic of paper money?


A) It has a high intrinsic value.
B) It is used in a barter economy.
C) It is valuable because it is generally accepted in trade.
D) It is valuable only because of the legal tender requirement.

E) C) and D)
F) A) and C)

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Which of the following best defines reserve requirements?


A) They are regulations concerning the amount banks are allowed to borrow from the central bank.
B) They are regulations concerning the amount of reserves banks must hold against deposits.
C) They are regulations concerning reserves banks must hold based on the number and type of loans they make.
D) They are regulations concerning the interest rate at which banks can borrow from the central bank.

E) C) and D)
F) B) and C)

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When the Bank of Canada decreases the bank rate,banks will borrow more from the Bank of Canada.Which of the following best describes the outcomes of this process?


A) Banks lend more to the public, and so the money supply will decrease.
B) Banks lend less to the public, and so the money supply will decrease.
C) Banks lend more to the public, and so the money supply will increase.
D) Banks lend less to the public, and so the money supply will increase.

E) None of the above
F) A) and D)

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Which of the following lists ranks assets from most to least liquid?


A) currency, fine art, stocks
B) currency, stocks, fine art
C) fine art, currency, stocks
D) fine art, stocks, currency

E) A) and B)
F) B) and D)

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Which of the following is the function of debit cards?


A) They defer payments.
B) They are equivalent to credit cards.
C) They are included in M2.
D) They are used as a method of payment.

E) A) and B)
F) All of the above

Correct Answer

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What is the role of the Bank of Canada?


A) to lend money to large companies
B) to make monetary policy
C) to raise taxes
D) to oversee government spending

E) A) and B)
F) A) and C)

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What do economists use the word "money" to refer to?


A) income generated by the production of goods and services
B) those assets regularly used to buy goods and services
C) the value of a person's assets
D) the value of stocks and bonds

E) A) and D)
F) A) and C)

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Who owns the Bank of Canada?


A) private individuals
B) the Queen
C) the commercial banks
D) the federal government of Canada

E) None of the above
F) A) and C)

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Which of the following characterizes currency?


A) It has intrinsic value.
B) It has no intrinsic value.
C) It may be used as a medium of exchange but is not legal tender.
D) It performs all the functions of money except providing a unit of account.

E) A) and D)
F) B) and C)

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Table 10-3 The following information pertains to the Bank of Edmonton. Table 10-3 The following information pertains to the Bank of Edmonton. -Refer to the Table 10-3.If the Bank of Canada requires banks to hold 5 percent of deposits as reserves,how much in excess reserves does the Bank of Edmonton now hold? A) $5 B) $25 C) $50 D) $55 -Refer to the Table 10-3.If the Bank of Canada requires banks to hold 5 percent of deposits as reserves,how much in excess reserves does the Bank of Edmonton now hold?


A) $5
B) $25
C) $50
D) $55

E) All of the above
F) A) and B)

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At one time,the country of Freedonia had no banks,but had currency of $40 million.Then a banking system was established with a reserve requirement of one-third.The people of Freedonia now keep half their money in the form of currency and half in the form of bank deposits.If banks do not hold excess reserves,how much currency do the people of Freedonia now hold?


A) $13.33 million
B) $20 million
C) $30 million
D) $36.36 million

E) C) and D)
F) B) and D)

Correct Answer

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If the reserve ratio is 7 percent and a bank receives a new deposit of $300,by how much can the bank increase its new loans?


A) by $21
B) by $279
C) by $300
D) by $4 285

E) A) and D)
F) B) and C)

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Which of the following characterizes commodity money?


A) It is money that is backed by gold.
B) It is the principal type of money in use today.
C) It is money with intrinsic value.
D) It is comprised of receipts created in international trade that are used as a medium of exchange.

E) B) and D)
F) A) and C)

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Suppose a bank has $200 000 in deposits and $180 000 in loans.What is its reserve ratio?


A) 1 percent
B) 5 percent
C) 10 percent
D) 18 percent

E) A) and B)
F) B) and C)

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Ralph deposits half of his inheritance in a savings account at the bank.In doing so,Ralph is using money as a medium of exchange.

A) True
B) False

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If the reserve ratio is 20 percent,how much is the money multiplier?


A) 2
B) 4
C) 5
D) 8

E) A) and D)
F) A) and C)

Correct Answer

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If the reserve ratio is 20 percent,how much money can be created from $100 of reserves? Show your work.

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(1/0.20)× ...

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Table 10-1 Table 10-1 -Refer to the Table 10-1.If $400 is deposited into the First Bank of Dawson City,which of the following happens? A) The bank will be able to make additional loans totalling $400. B) Excess reserves initially increase by $400. C) Required reserves initially increase by $8000. D) Excess reserves initially increase by $320. -Refer to the Table 10-1.If $400 is deposited into the First Bank of Dawson City,which of the following happens?


A) The bank will be able to make additional loans totalling $400.
B) Excess reserves initially increase by $400.
C) Required reserves initially increase by $8000.
D) Excess reserves initially increase by $320.

E) A) and D)
F) C) and D)

Correct Answer

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