Question 1

Which of the following are all assets to a chartered bank?

Accepted Answer

A)  demand deposits, stock shares, and reserves
B)  vault cash, property, and reserves
C)  vault cash, property, and stock shares
D)  vault cash, stock shares, and demand depositsE) A) and B)
F) None of the above

Question 2

Henry Trudeau deposits $2,000 in currency in the First Street Bank.Later that same day Jane Harris negotiates a loan for $5,400 at the same bank.This loan alone will:

Accepted Answer

A)  increase the supply of money by $2,100.
B)  increase the supply of money by $3,300.
C)  increase the supply of money by $5,400.
D)  decrease the supply of money by $3,300.E) B) and C)
F) All of the above

Question 3

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

Question 4

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

Question 5

The amount that a chartered bank can lend is determined by its:

Accepted Answer

A)  desired reserves.
B)  excess reserves.
C)  outstanding loans.
D)  outstanding demand deposits.E) A) and B)
F) A) and C)

Question 6

What is one significant characteristic of fractional reserve banking?

Accepted Answer

A)  Banks are not subject to "panics" or "runs."
B)  Banks use deposit insurance for loans to customers.
C)  Bank loans will be equal to the amount of gold on deposit.
D)  Banks can create money through lending their reserves.E) B) and C)
F) A) and B)

Question 7

If you are estimating your total expenses for school next semester, you are using money as:

Accepted Answer

A)  a medium of exchange.
B)  a store of value.
C)  a unit of account.
D)  all of the above.E) B) and D)
F) A) and D)

Question 8

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

Question 9

A cheque for $10,000 drawn on Bank A by a depositor and deposited in Bank B will increase the excess reserves in Bank B by $10,000.

Accepted Answer

A) True 
 B)False

Question 10

If the desired reserve ratio falls:

Accepted Answer

A)  banks would be prompted to reduce their lending.
B)  the size of the money multiplier would increase.
C)  the actual reserves of banks would increase.
D)  none of the above would occur.E) B) and D)
F) A) and C)

Question 11

Banks create money when they:

Accepted Answer

A)  add to their reserves in the Bank of Canada.
B)  accept deposits of cash.
C)  sell government bonds.
D)  exchange demand deposits for the IOUs of businesses and individuals.E) B) and D)
F) All of the above

Question 12

When chartered banks retire outstanding loans, the supply of money is increased.

Accepted Answer

A) True 
 B)False

Question 13

Refer to the information below.The M1 definition of money comprises item(s) : 1.Foreign currency deposits of residents booked in Canada
2) Personal savings deposits
3) Currency (coins and paper money) 
4) Demand deposits
5) Government securities
6) Nonpersonal notice deposits

Accepted Answer

A)  3 only.
B)  2, 3, and 6.
C)  3 and 4.
D)  3, 4, and 6.E) A) and C)
F) All of the above

Question 14

When a bank loan is repaid the supply of money:

Accepted Answer

A)  is constant, but its composition will have changed.
B)  is decreased.
C)  is increased.
D)  may either increase or decrease.E) C) and D)
F) B) and D)

Question 15

If the price index rises from 100 to 120, the value of the dollar:

Accepted Answer

A)  may either rise or fall.
B)  will rise by 16.67 percent.
C)  will fall by 16.67 percent.
D)  will rise by 20 percent.E) C) and D)
F) All of the above

Question 16

The following balance sheet is for the First National Bank.Assume the desired reserve ratio is 15 percent.  Refer to the above data.If a cheque for $14,000 is drawn and cleared against this bank, its reserves and demand deposits will be, respectively:

Accepted Answer

A)  $50,000 and $120,000.
B)  $50,000 and $106,000.
C)  $36,000 and $120,000.
D)  $36,000 and $106,000.E) None of the above
F) All of the above

Question 17

Demand deposits are also called:

Accepted Answer

A)  chequing accounts.
B)  high-powered money.
C)  savings balances.
D)  Bank of Canada notes.E) None of the above
F) B) and C)

Question 18

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 new currency deposit = $0.Refer to the above information.The banking system will be able to expand the money supply through loans by:

Accepted Answer

A)  $160 billion.
B)  $200 billion.
C)  $40 billion.
D)  $128 billion.E) None of the above
F) B) and C)

Question 19

A chartered bank has demand-deposit liabilities of $500,000, cash reserves of $150,000, and a desired reserve ratio of 20 percent.The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

Accepted Answer

A)  $30,000 and $150,000.
B)  $50,000 and $250,000.
C)  $50,000 and $500,000.
D)  $100,000 and $500,000.E) A) and D)
F) All of the above

Question 20

Balance sheets always balance because assets must always equal liabilities plus net worth.

Accepted Answer

A) True 
 B)False

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

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

A chartered bank has demand-deposit liabilities of $500,000, cash reserves of $150,000, and a desired reserve ratio of 20 percent.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 the desired reserve ratio were 100 percent, the value of the money multiplier would be:

Correct AnswerverifiedShow Answer

Demand deposits are also called:

Correct AnswerverifiedShow Answer

Refer to the information below.The M1 definition of money comprises item(s) : 1.Foreign currency deposits of residents booked in Canada 2) Personal savings deposits 3) Currency (coins and paper money) 4) Demand deposits 5) Government securities 6) Nonpersonal notice deposits

Correct AnswerverifiedShow Answer

The amount of money reported as M2:

Correct AnswerverifiedShow Answer

Balance sheets always balance because assets must always equal liabilities plus net worth.

Correct AnswerverifiedShow Answer

If the price index rises from 100 to 120, the value of the dollar:

Correct AnswerverifiedShow Answer

When a bank loan is repaid the supply of money:

Correct AnswerverifiedShow Answer

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 new currency deposit = $0.Refer to the above information.The banking system will be able to expand the money supply through loans by:

Correct AnswerverifiedShow Answer

The following balance sheet is for the First National Bank.Assume the desired reserve ratio is 15 percent. Refer to the above data.If a cheque for $14,000 is drawn and cleared against this bank, its reserves and demand deposits will be, respectively:

Correct AnswerverifiedShow Answer

If you are estimating your total expenses for school next semester, you are using money as:

Correct AnswerverifiedShow Answer

Banks create money when they:

Correct AnswerverifiedShow Answer

A cheque for $10,000 drawn on Bank A by a depositor and deposited in Bank B will increase the excess reserves in Bank B by $10,000.

Correct AnswerverifiedShow Answer

The amount that a chartered bank can lend is determined by its:

Correct AnswerverifiedShow Answer

Henry Trudeau deposits $2,000 in currency in the First Street Bank.Later that same day Jane Harris negotiates a loan for $5,400 at the same bank.This loan alone will:

Correct AnswerverifiedShow Answer

When chartered banks retire outstanding loans, the supply of money is increased.

Correct AnswerverifiedShow Answer

What is one significant characteristic of fractional reserve banking?

Correct AnswerverifiedShow Answer

Which of the following are all assets to a chartered bank?

Correct AnswerverifiedShow Answer

If the desired reserve ratio falls:

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