Question 1

The claims of the owners of a firm against the firm's assets are called:

Accepted Answer

A)   working capital.
B)   assets.
C)   net worth.
D)   liabilities.E) A) and D)
F) None of the above

Question 2

Securitization is the process of slicing up and bundling groups of loans,mortgages,corporate bonds and other financial debts into distinct new securities.

Accepted Answer

A) True 
 B)False

Question 3

If excess reserves in the banking system are $4,000,demand deposits are $40,000,and the desired reserve ratio is 10 percent,then actual cash reserves:

Accepted Answer

A)   are $4,000.
B)   are $6,000.
C)   are $8,000.
D)   cannot be determined from this information.E) A) and D)
F) A) and C)

Question 4

The relative importance of various asset items on a chartered bank's balance sheet reflects a bank's pursuit of which two conflicting goals?

Accepted Answer

A)   profits and risk
B)   liquidity and profits
C)   assets and liabilities
D)   buying and selling government securitiesE) A) and C)
F) A) and B)

Question 5

Token money is:

Accepted Answer

A)   minted by the Bank of Canada.
B)   minted by the Royal Canadian mint.
C)   minted by the Treasury of Canada.
D)   not considered to be part of the money supply.E) B) and C)
F) A) and B)

Question 6

A $20 bill is an example of:

Accepted Answer

A)   legal tender.
B)   fiat money.
C)   a store of value.
D)   all of the above.E) A) and B)
F) All of the above

Question 7

The functions of money are to serve as a:

Accepted Answer

A)   resource allocator,method for accounting,and means of income distribution.
B)   unit of account,store of value,and medium of exchange.
C)   determinant of consumption,investment,and government spending.
D)   factor of production,exchange,and aggregate supply.E) A) and C)
F) A) and D)

Question 8

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

Question 9

1. Foreign currency deposits of residents booked in Canada
2. Personal savings deposits at the chartered banks
3. Currency (coins and paper money) 
4. Demand deposits
5. Government securities
6. Non-personal notice deposits at the chartered banks
-Refer to the above information.The M2 definition of money includes:

Accepted Answer

A)   items 1,2,3,and 6.
B)   items 3,4,5,and 6.
C)   items 2,3,4,and 6.
D)   items 1,2,3,and 4.E) A) and D)
F) A) and C)

Question 10

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

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

The basic source of money in our economy is the Department of Finance.

Accepted Answer

A) True 
 B)False

Question 13

If the value of the dollar is falling,then it follows that:

Accepted Answer

A)   the price index is falling.
B)   the price index is rising.
C)   real incomes are falling.
D)   interest rates are rising.E) A) and B)
F) A) and C)

Question 14

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) A) and B)

Question 15

-Refer to the above information.If the desired reserve ratio falls from 25 percent to 10 percent,excess reserves of this single bank will:

Accepted Answer

A)   rise by $6,000 and the monetary multiplier will increase from 4 to 10.
B)   rise by $60,000 and the monetary multiplier will increase from 4 to 10.
C)   fall by $6,000 and the monetary multiplier will decline from 30 to 10.
D)   fall by $2,000 and the monetary multiplier will decline from 10 to 4.E) A) and C)
F) B) and C)

Question 16

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

Question 17

Assume that Johnson deposits $350 of his currency in his account in the XYZ bank.Later the same day Swanson negotiates a loan for $2,000 at the same bank.In what direction and by what amount has this single transaction changed the supply of money?

Accepted Answer

A)   increased by $2,350
B)   increased by $2,000
C)   decreased by $350
D)   decreased by $1,650E) None of the above
F) B) and C)

Question 18

Suppose a chartered bank has demand deposits of $100,000 and the desired reserve ratio is 10 percent.If the bank's desired and excess reserves are equal,then its actual cash reserves:

Accepted Answer

A)   are $30,000.
B)   are $10,000.
C)   are $20,000.
D)   cannot be determined from the given information.E) C) and D)
F) A) and B)

Question 19

When a cheque is drawn and cleared,the

Accepted Answer

A)   reserves and deposits of both the bank against which the cheque is cleared and the bank receiving the cheque are unchanged by this transaction.
B)   bank against which the cheque is cleared loses cash reserves and deposits equal to the amount of the cheque.
C)   bank receiving the cheque loses reserves and deposits equal to the amount of the cheque.
D)   bank against which the cheque is cleared acquires reserves and deposits equal to the amount of the cheque.E) None of the above
F) A) and B)

Question 20

-Refer to the above information for a single chartered bank.When the desired reserve ratio is 30 percent,the money multiplier is:

Accepted Answer

A)   5.
B)   4.
C)   3.33.
D)   2.5.E) A) and B)
F) All of the above

Exam 14: Money, Banking, and Money Creation

-Refer to the above information.If the desired reserve ratio falls from 25 percent to 10 percent,excess reserves of this single bank will:

Correct Answer
verified

Demand deposits are classified as money because:

Correct Answer
verified

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

Correct Answer
verified

The claims of the owners of a firm against the firm's assets are called:

Correct Answer
verified

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

Correct Answer
verified

The relative importance of various asset items on a chartered bank's balance sheet reflects a bank's pursuit of which two conflicting goals?

Correct Answer
verified

The basic source of money in our economy is the Department of Finance.

Correct Answer
verified

Suppose a chartered bank has demand deposits of $100,000 and the desired reserve ratio is 10 percent.If the bank's desired and excess reserves are equal,then its actual cash reserves:

Correct Answer
verified

A $20 bill is an example of:

Correct Answer
verified

Securitization is the process of slicing up and bundling groups of loans,mortgages,corporate bonds and other financial debts into distinct new securities.

Correct Answer
verified

Correct Answer
verified

Token money is:

Correct Answer
verified

If excess reserves in the banking system are $4,000,demand deposits are $40,000,and the desired reserve ratio is 10 percent,then actual cash reserves:

Correct Answer
verified

Assume that Johnson deposits $350 of his currency in his account in the XYZ bank.Later the same day Swanson negotiates a loan for $2,000 at the same bank.In what direction and by what amount has this single transaction changed the supply of money?

Correct Answer
verified

If the value of the dollar is falling,then it follows that:

Correct Answer
verified

When a cheque is drawn and cleared,the

Correct Answer
verified

The functions of money are to serve as a:

Correct Answer
verified

The amount of money reported as M2:

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

-Refer to the above information for a single chartered bank.When the desired reserve ratio is 30 percent,the money multiplier is:

Correct Answer
verified

Exam 14: Money, Banking, and Money Creation

-Refer to the above information.If the desired reserve ratio falls from 25 percent to 10 percent,excess reserves of this single bank will:

Correct AnswerverifiedShow Answer

Demand deposits are classified as money because:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The claims of the owners of a firm against the firm's assets are called:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The relative importance of various asset items on a chartered bank's balance sheet reflects a bank's pursuit of which two conflicting goals?

Correct AnswerverifiedShow Answer

The basic source of money in our economy is the Department of Finance.

Correct AnswerverifiedShow Answer

Suppose a chartered bank has demand deposits of $100,000 and the desired reserve ratio is 10 percent.If the bank's desired and excess reserves are equal,then its actual cash reserves:

Correct AnswerverifiedShow Answer

A $20 bill is an example of:

Correct AnswerverifiedShow Answer

Securitization is the process of slicing up and bundling groups of loans,mortgages,corporate bonds and other financial debts into distinct new securities.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Token money is:

Correct AnswerverifiedShow Answer

If excess reserves in the banking system are $4,000,demand deposits are $40,000,and the desired reserve ratio is 10 percent,then actual cash reserves:

Correct AnswerverifiedShow Answer

Assume that Johnson deposits $350 of his currency in his account in the XYZ bank.Later the same day Swanson negotiates a loan for $2,000 at the same bank.In what direction and by what amount has this single transaction changed the supply of money?

Correct AnswerverifiedShow Answer

If the value of the dollar is falling,then it follows that:

Correct AnswerverifiedShow Answer

When a cheque is drawn and cleared,the

Correct AnswerverifiedShow Answer

The functions of money are to serve as a:

Correct AnswerverifiedShow Answer

The amount of money reported as M2:

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

-Refer to the above information for a single chartered bank.When the desired reserve ratio is 30 percent,the money multiplier is:

Correct AnswerverifiedShow Answer

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