Question 1

The amount of money reported as M2:

Accepted Answer

A)  is smaller than the amount reported as M1.
B)  is larger than the amount reported as M1.
C)  excludes coins and currency.
D)  includes nonpersonal fixed-term deposits of residents booked in Canada.E) B) and D)
F) A) and B)

Question 2

When a chartered bank has "excess reserves":

Accepted Answer

A)  it is in a position to make additional loans.
B)  its actual reserves are less than its desired reserves.
C)  it is charging too high an interest rate on its loans.
D)  its reserves exceed its assets.E) None of the above
F) A) and B)

Question 3

The following balance sheet is for the First Edmonton Bank.All figures are in millions.  Refer to the above information.If this bank finds that it has excess reserves of $6, the desired ratio must be:

Accepted Answer

A)  10 percent.
B)  12 percent.
C)  14 percent.
D)  20 percent.E) B) and D)
F) A) and D)

Question 4

Which of the following statements best describes the relationship between the real value or purchasing power of the monetary unit and the price level? The purchasing power of money:

Accepted Answer

A)  and the price level varies inversely.
B)  and the price level vary directly during recessions, but inversely during inflations.
C)  and the price level vary directly, but not proportionately.
D)  and the price level vary directly and proportionately.E) None of the above
F) A) and C)

Question 5

The reserve ratio is equal to:

Accepted Answer

A)  a chartered bank's demand-deposit liabilities divided by its desired reserve.
B)  a chartered bank's desired reserve divided by its demand-deposit liabilities.
C)  a chartered bank's demand-deposit liabilities multiplied by its excess reserves.
D)  a chartered bank's excess reserves divided by its desired reserve.E) None of the above
F) A) and D)

Question 6

The goldsmith's ability to create money was based on the fact that:

Accepted Answer

A)  withdrawals of gold tended to exceed deposits of gold in any given time period.
B)  consumers and merchants preferred to use gold for transactions, rather than paper money.
C)  the goldsmith was required to keep 100 percent gold reserves.
D)  paper money was rarely redeemed for gold.E) None of the above
F) C) and D)

Question 7

Securitization is:

Accepted Answer

A)  the process of slicing up and bundling groups of loans, mortgages, corporate bonds and other financial debts into distinct new securities.
B)  the securing of loans, mortgages, corporate bonds and other financial debts by governments.
C)  a guarantee that loans, mortgages, corporate bonds and other financial debts were secure.
D)  the process of securing loans, mortgages, corporate bonds and other financial debts by insurance companies.E) A) and B)
F) B) and C)

Question 8

When we say that money serves as a medium of exchange, we mean that it is:

Accepted Answer

A)  a way to keep some of our wealth in a readily spendable form for future use.
B)  a means of payment.
C)  a monetary unit for measuring and comparing the relative values of goods.
D)  declared as legal tender by the government.E) B) and C)
F) A) and C)

Question 9

Money functions as:

Accepted Answer

A)  a store of value.
B)  a unit of account.
C)  a medium of exchange.
D)  all of the above.E) None of the above
F) B) and C)

Question 10

If D equals the maximum amount of new demand-deposit money that can be created by the banking system on the basis of any given amount of excess reserves; E equals the amount of excess reserves; and m is the money multiplier, then we can say that:

Accepted Answer

A)  m = E/D.
B)  D = E  ×	imes×  m.
C)  D = E - 1/m.
D)  D = m/E. E) A) and C)
F) B) and C)

Question 11

The amount of reserves that a chartered bank wishes to hold is equal to:

Accepted Answer

A)  the amount of its demand deposits.
B)  the sum of its demand deposits and time deposits.
C)  its demand deposits multiplied by the desired reserve ratio.
D)  none of the above.E) None of the above
F) A) and B)

Question 12

Which of the following business assets is normally the most liquid?

Accepted Answer

A)  Accounts receivable
B)  Merchandise inventory
C)  Capital equipment
D)  Office suppliesE) C) and D)
F) All of the above

Question 13

Which of the following is correct?

Accepted Answer

A)  Desired reserves minus actual reserves equal excess reserves.
B)  Desired reserves equal excess reserves minus actual reserves.
C)  Desired reserves equal actual reserves plus excess reserves.
D)  Actual cash reserves minus desired reserves equal excess reserves.E) All of the above
F) B) and C)

Question 14

The balance sheet below is for chartered bank ABC.Assume the desired reserve ratio is 20 percent.All figures are in billions.  Refer to the above information.The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

Accepted Answer

A)  $5,000 and $110,000.
B)  $5,000 and $25,000.
C)  $5,000 and, 22,000.
D)  $5,000 and, 27,000.E) A) and C)
F) A) and B)

Question 15

Chartered banks create money in the form of chequable deposits when they make loans.

Accepted Answer

A) True 
 B)False

Question 16

Other things equal, we would expect an excessive increase in the supply of money to:

Accepted Answer

A)  increase the purchasing power of each dollar.
B)  decrease the purchasing power of each dollar.
C)  have no impact upon the purchasing power of the dollar.
D)  cause the price level to fall.E) A) and B)
F) A) and C)

Question 17

The following is information about a banking system: New currency deposited in the system = $40 billion; desired reserve ratio = 20%;
Excess reserves prior to the currency deposit = $0.Refer to the above information.The $40 billion deposit of currency into chequing accounts will create excess reserves of:

Accepted Answer

A)  $20 billion.
B)  $32 billion.
C)  $40 billion.
D)  $0.E) A) and B)
F) A) and C)

Question 18

If the desired reserve ratio were 15 percent, the value of the monetary multiplier would be:

Accepted Answer

A)  5.50.
B)  6.67.
C)  7.32.
D)  8.54.E) A) and B)
F) A) and C)

Question 19

One of the three basic functions of money is to serve as legal tender.

Accepted Answer

A) True 
 B)False

Question 20

If the desired reserve ratio were 100 percent, the value of the money multiplier would be:

Accepted Answer

A)  0
B)  1
C)  10
D)  100E) C) and D)
F) B) and D)

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

Which of the following statements best describes the relationship between the real value or purchasing power of the monetary unit and the price level? The purchasing power of money:

Correct Answer
verified

The reserve ratio is equal to:

Correct Answer
verified

The following balance sheet is for the First Edmonton Bank.All figures are in millions. Refer to the above information.If this bank finds that it has excess reserves of $6, the desired ratio must be:

Correct Answer
verified

When a chartered bank has "excess reserves":

Correct Answer
verified

When we say that money serves as a medium of exchange, we mean that it is:

Correct Answer
verified

Which of the following business assets is normally the most liquid?

Correct Answer
verified

One of the three basic functions of money is to serve as legal tender.

Correct Answer
verified

If the desired reserve ratio were 15 percent, the value of the monetary multiplier would be:

Correct Answer
verified

If the desired reserve ratio were 100 percent, the value of the money multiplier would be:

Correct Answer
verified

The balance sheet below is for chartered bank ABC.Assume the desired reserve ratio is 20 percent.All figures are in billions. Refer to the above information.The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

Correct Answer
verified

If D equals the maximum amount of new demand-deposit money that can be created by the banking system on the basis of any given amount of excess reserves; E equals the amount of excess reserves; and m is the money multiplier, then we can say that:

Correct Answer
verified

Money functions as:

Correct Answer
verified

The amount of money reported as M2:

Correct Answer
verified

The amount of reserves that a chartered bank wishes to hold is equal to:

Correct Answer
verified

Other things equal, we would expect an excessive increase in the supply of money to:

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

The goldsmith's ability to create money was based on the fact that:

Correct Answer
verified

Chartered banks create money in the form of chequable deposits when they make loans.

Correct Answer
verified

Correct Answer
verified

Securitization is:

Correct Answer
verified

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

Which of the following statements best describes the relationship between the real value or purchasing power of the monetary unit and the price level? The purchasing power of money:

Correct AnswerverifiedShow Answer

The reserve ratio is equal to:

Correct AnswerverifiedShow Answer

The following balance sheet is for the First Edmonton Bank.All figures are in millions. Refer to the above information.If this bank finds that it has excess reserves of $6, the desired ratio must be:

Correct AnswerverifiedShow Answer

When a chartered bank has "excess reserves":

Correct AnswerverifiedShow Answer

When we say that money serves as a medium of exchange, we mean that it is:

Correct AnswerverifiedShow Answer

Which of the following business assets is normally the most liquid?

Correct AnswerverifiedShow Answer

One of the three basic functions of money is to serve as legal tender.

Correct AnswerverifiedShow Answer

If the desired reserve ratio were 15 percent, the value of the monetary multiplier would be:

Correct AnswerverifiedShow Answer

If the desired reserve ratio were 100 percent, the value of the money multiplier would be:

Correct AnswerverifiedShow Answer

The balance sheet below is for chartered bank ABC.Assume the desired reserve ratio is 20 percent.All figures are in billions. Refer to the above information.The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

Correct AnswerverifiedShow Answer

If D equals the maximum amount of new demand-deposit money that can be created by the banking system on the basis of any given amount of excess reserves; E equals the amount of excess reserves; and m is the money multiplier, then we can say that:

Correct AnswerverifiedShow Answer

Money functions as:

Correct AnswerverifiedShow Answer

The amount of money reported as M2:

Correct AnswerverifiedShow Answer

The amount of reserves that a chartered bank wishes to hold is equal to:

Correct AnswerverifiedShow Answer

Other things equal, we would expect an excessive increase in the supply of money to:

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

The goldsmith's ability to create money was based on the fact that:

Correct AnswerverifiedShow Answer

Chartered banks create money in the form of chequable deposits when they make loans.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Securitization is:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified