Question 1

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

Question 2

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

Question 3

For a bank, safety lies in:

Accepted Answer

A)  liquidity.
B)  asset accumulation.
C)  risk management.
D)  liability reduction.E) B) and C)
F) None of the above

Question 4

If you deposit a $50 bill in a chartered bank that has a 10 percent desired reserve ratio, the bank will:

Accepted Answer

A)  have $45 of additional excess reserves.
B)  be capable of lending an additional $500.
C)  be capable of lending an additional $50.
D)  have $50 of desired reserves.E) B) and C)
F) A) and D)

Question 5

Mortgage-backed securities are bonds backed by mortgage payments.

Accepted Answer

A) True 
 B)False

Question 6

A chartered bank sells a $10,000 government securities to a securities dealer.The dealer pays for the bond in cash, which the bank adds to its vault cash.As the result of this single transaction the money supply has:

Accepted Answer

A)  decreased by $10,000 multiplied by the reciprocal of the desired reserve ratio.
B)  decreased by $10,000.
C)  increased by $10,000.
D)  not been affected.E) B) and D)
F) C) and D)

Question 7

Beside chartered banks, the Canadian banking system is supplemented by other financial intermediaries.These institutions include:

Accepted Answer

A)  loan companies, trust companies, credit unions, and caisses populaires.
B)  trust companies, the Bank of Canada and small size chartered banks.
C)  trust companies, credit unions, and the Bank of Canada.
D)  loan companies, trust companies and foreign banks.E) C) and D)
F) All of the above

Question 8

The Vancouver Bank's balance statement is as follows: All figures are in billions.  Refer to the above information and, assuming that desired reserve ratio is 10 percent, after a cheque for $20,000 is drawn and cleared against this bank, its excess reserve will be:

Accepted Answer

A)  $3,000
B)  $24,000
C)  $9,000
D)  $16,000E) A) and D)
F) A) and C)

Question 9

In terms of volume or dollar amount, most of the money in our economy is created by:

Accepted Answer

A)  the receipt of gold bullion through international trade and finance.
B)  chartered banks and the Bank of Canada.
C)  the Royal Canadian mint.
D)  the Department of Finance.E) All of the above
F) A) and B)

Question 10

When we say that money serves as a store of value, 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) A) and C)
F) A) and B)

Question 11

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 total demand deposit after the expansion of the money supply through loans is:

Accepted Answer

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

Question 12

A bank owns a 10-story office building.In the bank's balance sheet, this would be an example of:

Accepted Answer

A)  an asset.
B)  a liability.
C)  stock shares.
D)  a chequable deposit.E) B) and D)
F) C) and D)

Question 13

Demand deposits are classified as money because:

Accepted Answer

A)  they can be readily used in the making of purchases and payment of debts.
B)  banks hold currency equal to the value of their outstanding deposits.
C)  they are ultimately the obligations of the government.
D)  they earn interest income for the depositor.E) B) and C)
F) None of the above

Question 14

Coins held in chartered banks are:

Accepted Answer

A)  included in M1, but not in M2.
B)  included both in M1 and in M2.
C)  included in M2, but not in M1.
D)  not part of the nation's money supply.E) C) and D)
F) A) and C)

Question 15

Given a 25 percent desired reserve ratio, assume the chartered banking system is loaned up.Now assume the desired reserve ratio falls to 20 percent.As a result of this reduction:

Accepted Answer

A)  we can expect bank lending and bank profits to decline.
B)  each dollar of bank reserves will now support a maximum of $5 of demand deposits.
C)  the banking system must now reduce outstanding loans by 5 percent.
D)  the banking system can now increase lending by 5 percent.E) A) and B)
F) B) and C)

Question 16

When a consumer wants to compare the price of one product with another, money is primarily functioning as a:

Accepted Answer

A)  store of value.
B)  unit of account.
C)  chequable deposit.
D)  medium of exchange.E) B) and C)
F) A) and D)

Question 17

Consolidated balance sheet for the chartered banking system.Assume the desired reserve ratio is 10 percent.All figures are in billions.  Refer to the above information.The chartered banking system has excess reserves of:

Accepted Answer

A)  $0 billion.
B)  $30 billion.
C)  $60 billion.
D)  $70 billion.E) C) and D)
F) A) and C)

Question 18

A chartered bank's desired reserve can be calculated by:

Accepted Answer

A)  dividing its excess reserves by its desired reserve.
B)  dividing its desired reserve by its excess reserves.
C)  multiplying its demand-deposit liabilities by the reserve ratio.
D)  multiplying its demand-deposit liabilities by its excess reserves.E) C) and D)
F) B) and C)

Question 19

Which one of the following is presently preventing bank panics in Canada?

Accepted Answer

A)  the reserve requirement
B)  the fractional reserve system
C)  the gold standard
D)  deposit insuranceE) B) and C)
F) A) and C)

Question 20

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

Accepted Answer

A)  gold certificates.
B)  demand deposits.
C)  paper money in circulation.
D)  coins.E) C) and D)
F) B) and D)

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

A bank owns a 10-story office building.In the bank's balance sheet, this would be an example of:

Correct Answer
verified

Which one of the following is presently preventing bank panics in Canada?

Correct Answer
verified

For a bank, safety lies in:

Correct Answer
verified

A chartered bank's desired reserve can be calculated by:

Correct Answer
verified

Demand deposits are classified as money because:

Correct Answer
verified

Coins held in chartered banks are:

Correct Answer
verified

When a consumer wants to compare the price of one product with another, money is primarily functioning as a:

Correct Answer
verified

Correct Answer
verified

Consolidated balance sheet for the chartered banking system.Assume the desired reserve ratio is 10 percent.All figures are in billions. Refer to the above information.The chartered banking system has excess reserves of:

Correct Answer
verified

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

Correct Answer
verified

Beside chartered banks, the Canadian banking system is supplemented by other financial intermediaries.These institutions include:

Correct Answer
verified

Given a 25 percent desired reserve ratio, assume the chartered banking system is loaned up.Now assume the desired reserve ratio falls to 20 percent.As a result of this reduction:

Correct Answer
verified

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 Answer
verified

When a bank loan is repaid the supply of money:

Correct Answer
verified

When we say that money serves as a store of value, we mean that it is:

Correct Answer
verified

In terms of volume or dollar amount, most of the money in our economy is created by:

Correct Answer
verified

If you deposit a $50 bill in a chartered bank that has a 10 percent desired reserve ratio, the bank will:

Correct Answer
verified

Mortgage-backed securities are bonds backed by mortgage payments.

Correct Answer
verified

A chartered bank sells a $10,000 government securities to a securities dealer.The dealer pays for the bond in cash, which the bank adds to its vault cash.As the result of this single transaction the money supply has:

Correct Answer
verified

The Vancouver Bank's balance statement is as follows: All figures are in billions. Refer to the above information and, assuming that desired reserve ratio is 10 percent, after a cheque for $20,000 is drawn and cleared against this bank, its excess reserve will be:

Correct Answer
verified

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

A bank owns a 10-story office building.In the bank's balance sheet, this would be an example of:

Correct AnswerverifiedShow Answer

Which one of the following is presently preventing bank panics in Canada?

Correct AnswerverifiedShow Answer

For a bank, safety lies in:

Correct AnswerverifiedShow Answer

A chartered bank's desired reserve can be calculated by:

Correct AnswerverifiedShow Answer

Demand deposits are classified as money because:

Correct AnswerverifiedShow Answer

Coins held in chartered banks are:

Correct AnswerverifiedShow Answer

When a consumer wants to compare the price of one product with another, money is primarily functioning as a:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Consolidated balance sheet for the chartered banking system.Assume the desired reserve ratio is 10 percent.All figures are in billions. Refer to the above information.The chartered banking system has excess reserves of:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Beside chartered banks, the Canadian banking system is supplemented by other financial intermediaries.These institutions include:

Correct AnswerverifiedShow Answer

Given a 25 percent desired reserve ratio, assume the chartered banking system is loaned up.Now assume the desired reserve ratio falls to 20 percent.As a result of this reduction:

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

When a bank loan is repaid the supply of money:

Correct AnswerverifiedShow Answer

When we say that money serves as a store of value, we mean that it is:

Correct AnswerverifiedShow Answer

In terms of volume or dollar amount, most of the money in our economy is created by:

Correct AnswerverifiedShow Answer

If you deposit a $50 bill in a chartered bank that has a 10 percent desired reserve ratio, the bank will:

Correct AnswerverifiedShow Answer

Mortgage-backed securities are bonds backed by mortgage payments.

Correct AnswerverifiedShow Answer

A chartered bank sells a $10,000 government securities to a securities dealer.The dealer pays for the bond in cash, which the bank adds to its vault cash.As the result of this single transaction the money supply has:

Correct AnswerverifiedShow Answer

The Vancouver Bank's balance statement is as follows: All figures are in billions. Refer to the above information and, assuming that desired reserve ratio is 10 percent, after a cheque for $20,000 is drawn and cleared against this bank, its excess reserve will be:

Correct AnswerverifiedShow Answer

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