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How does M1 compare with M2?


A) M1 is smaller and less liquid than M2.
B) M1 is smaller but more liquid than M2.
C) M1 is larger than and less liquid than M2.
D) M1 is larger than but more liquid than M2.

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

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How can the Bank of Canada directly protect a bank during a bank run?


A) by increasing reserve requirements
B) by selling government bonds to the bank
C) by lending reserves to the bank
D) by penalizing the bank in trouble

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

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Which of the following best defines liquidity?


A) It is the ease with which an asset is converted to the medium of exchange.
B) It is a measurement of the intrinsic value of commodity money.
C) It is the suitability of an asset to serve as a store of value.
D) It refers to how many times a dollar changes hands in a given year.

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

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Which of the following is a characteristic of the Bank of Nova Scotia?


A) It can issue currency. .
B) It is part of the "big 5" commercial banks group.
C) It acts as a central bank for Nova Scotia.
D) It is owned by the Canadian government.

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

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Suppose a bank has $10 000 in deposits and $7000 in loans. What is its reserve ratio?


A) 3 percent
B) 7 percent
C) 30 percent
D) 70 percent

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

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Which of the following lists ranks the Bank of Canada's monetary policy tools from most to least frequently used?


A) bank rate changes; reserve requirement changes; open market transactions
B) reserve requirement changes; open market transactions; bank rate changes
C) open market transactions; bank rate changes; reserve requirement changes
D) open market transactions; reserve requirement changes; bank rate changes

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

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Given the size of the Canadian money stock, is the amount of currency per person reasonable?


A) Yes, the amount of currency per person is about right.
B) There is no way of determining the amount of currency in circulation.
C) No, there is too little currency per person.
D) No, there is too much currency per person.

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

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M1 includes savings deposits.

A) True
B) False

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If the Bank of Canada buys bonds in the open market, the money supply decreases.

A) True
B) False

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Which of the following is a generally accepted medium of exchange?


A) a plane ticket
B) federal government bonds
C) fine art
D) currency

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

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Which of the following is one of the functions of the Bank of Canada?


A) to maximize profits on behalf of its shareholders
B) to act as a lender of last resort
C) to convert currency into gold
D) to bail out troubled commercial banks

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

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Which two of the Ten Principles of Economics imply that the Bank of Canada can profoundly affect the economy?

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1. Prices rise when the govern...

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Economists argue that the move from barter to money increased trade and production. How is this possible?

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The use of money allows people...

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


A) The Bank of Canada sells Treasury bills, which increases the money supply.
B) The Bank of Canada sells 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 D)
F) C) and D)

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Which of the following best defines barter?


A) It is an exchange of goods for money.
B) It is an exchange of money for foreign currency.
C) It is a generally accepted legal tender.
D) It is a transaction that requires a double coincidence of wants.

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

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Table 29-4 The following information pertains to the Bank of Edmonton. Table 29-4 The following information pertains to the Bank of Edmonton. -Refer to Table 29-4. Assume that all other banks hold only the required 5 percent of deposits as reserves and people hold only deposits and no currency. If the Bank of Edmonton decides to hold exactly 5 percent reserves, by how much would the economy's money supply increase? A) $500 B) $1000 C) $1500 D) $2000 -Refer to Table 29-4. Assume that all other banks hold only the required 5 percent of deposits as reserves and people hold only deposits and no currency. If the Bank of Edmonton decides to hold exactly 5 percent reserves, by how much would the economy's money supply increase?


A) $500
B) $1000
C) $1500
D) $2000

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

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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 all banks hold only the required 4 percent of deposits as reserves, then what is the money multiplier? A) 5 B) 10 C) 15 D) 25 -Refer to Table 29-5. If all banks hold only the required 4 percent of deposits as reserves, then what is the money multiplier?


A) 5
B) 10
C) 15
D) 25

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

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How may the Bank of Canada influence the price level?


A) by conducting open market sales and raising the bank rate
B) by conducting open market sales and lowering the bank rate
C) by conducting open market purchases and raising the bank rate
D) by conducting open market purchases and lowering the bank rate

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

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Suppose an economy has no money, and people use gold for all payments. a.Discuss the effects of economic growth (an increase in the amount of goods and services that the economy produces) on prices. b.What happens to prices when more gold becomes available, say due to new openings of gold mines? c.Who determines the economy's money supply?dDiscuss the advantages and disadvantages of such a "gold standard" economy.

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a.If the amount of goods and services av...

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What do economists use the word "money" to refer to?


A) income generated by the production of goods and services
B) those assets regularly used to buy goods and services
C) the value of a person's assets
D) the value of stocks and bonds

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

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