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| 1 | |
What is the basis of the modern banking system? |
| | A) | Fractional reserves |
| | B) | Commodity money |
| | C) | A medium of exchange |
| | D) | Gold |
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| 2 | |
What is the value of the money multiplier? |
| | A) | One, divided by the target reserve ratio |
| | B) | The reciprocal of the MPC |
| | C) | M1 divided by the multiplier |
| | D) | It is always 2 |
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| 3 | |
What kind of banking system does Canada have? |
| | A) | A unit banking system |
| | B) | A branch banking system |
| | C) | A money banking system |
| | D) | A provincial banking system |
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| 4 | |
If you were working out the cost of attending school next year, which function of money would you be using? |
| | A) | A medium of exchange |
| | B) | A unit of account |
| | C) | A store of wealth |
| | D) | The commercial function |
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| 5 | |
If you wrote out a cheque to buy textbooks, which function of money would you be using? |
| | A) | A medium of exchange |
| | B) | A unit of account |
| | C) | A store of wealth |
| | D) | The commercial function |
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| 6 | |
What is the spread? |
| | A) | The difference between a bank’s actual reserves and its target reserves |
| | B) | The interest rate difference between what a bank charges borrowers and what it pays savers |
| | C) | The difference between a bank’s demand deposits and its total loans to customers |
| | D) | The geographical distribution of banks across the country |
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| 7 | |
Why is the banking system able to increase loans and demand deposits by a multiple of its excess reserves? |
| | A) | Because reserves lost by one bank are gained by another |
| | B) | Because the MPC of borrowers is positive |
| | C) | Because one person’s debt becomes another person’s income |
| | D) | Because the target reserve ratio is greater than one |
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| 8 | |
What is the definition of M1? |
| | A) | Currency in circulation only |
| | B) | Currency in circulation plus demand deposits and savings accounts |
| | C) | Currency in circulation plus demand deposits and Canada Savings Bonds |
| | D) | Currency in circulation plus demand deposits |
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| 9 | |
Which of the following statements about the value of money is correct? |
| | A) | It varies inversely with the price level. |
| | B) | It varies directly with the interest rate. |
| | C) | It varies directly with the price level. |
| | D) | It varies directly with the quantity of money. |
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| 10 | |
Which of the following are assets to a bank? |
| | A) | Demand deposits, equity, and reserves |
| | B) | Reserves, loans to customers, and securities |
| | C) | Reserves, property, and equity |
| | D) | Equity, property, and demand deposits |
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| 11 | |
Suppose that the Canucks Bank has excess reserves of $6000 and demand deposits of $100 000.
If its targeted reserve ratio is 10 percent, what is the size of the bank’s actual reserves? |
| | A) | $4000 |
| | B) | $16 000 |
| | C) | $10 000 |
| | D) | $14 000 |
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| 12 | |
All of the following, except one, are characteristics that money should possess. Which is the exception? |
| | A) | It should have general acceptability. |
| | B) | It should be divisible. |
| | C) | It should be convertible into gold or other precious metals. |
| | D) | It should be portable. |
| | E) | It should be durable. |
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| 13 | |
Suppose that a banking system has $10 000 000 in demand deposits and actual reserves of $1 200 000. If the target reserve ratio for all banks is 10 percent, what is the maximum possible expansion of the money supply? |
| | A) | $2 200 000 |
| | B) | $115 000 |
| | C) | $200 000 |
| | D) | $12 000 000 |
| | E) | $2 000 000 |
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| 14 | |
What is the difference between M1 and M2? |
| | A) | M1 includes currency in circulation, and M2 does not. |
| | B) | M2 includes certificates of deposit, and M1 does not. |
| | C) | M2 includes notice deposits and personal term deposits, and M1 does not. |
| | D) | M2 is always smaller than M1. |
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| 15 | |
How is the money multiplier calculated? |
| | A) | Divide the target reserve ratio by 1 |
| | B) | Divide 1 by the target reserve ratio |
| | C) | Multiply the target reserve ratio by M1 |
| | D) | Multiply the target reserve ratio by 1 |
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