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Which of the following agencies is responsible for regulating the money supply in Canada?


A) the Comptroller of the Currency
B) the Bank of Canada
C) the TD Bank
D) the Canadian Payments Association

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

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Use the balance sheet below for the following questions. Table 29-2 Use the balance sheet below for the following questions. Table 29-2 -Refer to Table 29-2. What is the reserve ratio? A) 0 percent B) 20 percent C) 80 percent D) 100 percent -Refer to Table 29-2. What is the reserve ratio?


A) 0 percent
B) 20 percent
C) 80 percent
D) 100 percent

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

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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/.20) * ...

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Which of the following explains the role of the Canadian Deposit Insurance Corporation (CDIC) ?


A) The CDIC protects depositors in the event of bank failures.
B) The CDIC routinely makes overnight loans to banks.
C) The CDIC determines the bank rate.
D) The CDIC determines the reserve requirement.

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

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Suppose Heather receives a payment in cash of $400 and she deposits it in a bank. a.If the banking system is 100 percent reserve, how does the money supply change? b.If the reserve requirement is 10 percent and the bank holds no excess reserve, how does the money supply change? c.If the reserve requirement is 10 percent and the bank holds an excess reserve of 2 percent, how does the money supply change?

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a.Since the $400 had been in circulation...

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Which of the following best illustrates the medium of exchange function of money?


A) You keep some money hidden in your shoe.
B) You keep track of the value of your assets in terms of currency.
C) You pay for your double latte using currency.
D) You lend $25 to your friend.

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

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An increase in reserve requirements raises the reserve ratio and decreases the money supply.

A) True
B) False

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For how long is the governor of the Bank of Canada appointed?


A) life
B) a seven-year term
C) a five-year term
D) a two-year term

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

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What is the difference between commodity money and fiat money? Why do people accept fiat currency in trade for goods and services?

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Commodity money has "intrinsic value," o...

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The Bank of Canada is run by the Board of Directors, who are appointed by the minister of Finance.

A) True
B) False

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

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Which of the following best describes the consequences of open market purchases conducted by the Bank of Canada?


A) Bank reserves increase and the money supply increases.
B) Bank reserves increase and the money supply decreases.
C) The Bank of Canada borrows from member banks, which increases the money supply.
D) The Bank of Canada lends money to member banks, which decreases the money supply.

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

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How does currency contribute to the money supply?


A) Currency held by the public and by banks is part of the money supply.
B) Currency held by the public is part of the money supply, but currency held by banks is not.
C) Currency held by the public is not part of the money supply, but currency held by banks is.
D) Currency held by the public or banks is not part of the money supply since it is not included in M1.

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

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Which of the following characterizes fiat money?


A) It has no intrinsic value.
B) It is backed by gold.
C) It has intrinsic value equal to its value in exchange.
D) It is an illiquid asset.

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

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If the reserve ratio is 10 percent and a bank receives a new deposit of $20, which of the following happens to this bank's reserves or deposits?


A) Required reserves must increase by $2.
B) Total reserves will increase by $2.
C) New loans can be made up to a maximum of $2.
D) Total reserves increase by $200.

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

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To increase the money supply, which of the following could the Bank of Canada do?


A) sell government bonds
B) increase the bank rate
C) decrease the reserve requirement
D) decrease the money multiplier

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

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In the nineteenth century when there were often bank runs caused by crop failures, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, which of the following actions should the banks have done?


A) They should have increased both the money multiplier and the money supply.
B) They should have decreased the money multiplier and increased the money supply.
C) They should have increased the money multiplier and decreased the money supply.
D) They should have decreased both the money multiplier and the money supply.

E) All of the above
F) None of the above

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Which of the following best describes the process of open market purchases conducted by the Bank of Canada?


A) The Bank of Canada buys Treasury bills, which increases the money supply.
B) The Bank of Canada buys Treasury bills, which decreases the money supply.
C) The Bank of Canada borrows from member banks, which increases the money supply.
D) The Bank of Canada lends money to member banks, which decreases the money supply.

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

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At one time, the country of Sylvania had no banks, but had currency of $10 million. Then a banking system was established with a reserve requirement of 20 percent. The people of Sylvania 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 Sylvania now hold?


A) $2 million
B) $5 million
C) $8.33 million
D) $9.09 million

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

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Table 29-5 The following information pertains to the Bank of Kingston. Table 29-5 The following information pertains to the Bank of Kingston. -Refer to Table 29-5. If the Bank of Canada requires a reserve ratio of 4 percent, how much in excess reserves does the Bank of Kingston now hold? A) $1200 B) $2400 C) $2880 D) $3000 -Refer to Table 29-5. If the Bank of Canada requires a reserve ratio of 4 percent, how much in excess reserves does the Bank of Kingston now hold?


A) $1200
B) $2400
C) $2880
D) $3000

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

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