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1
Suppose that Adam Ricardo deposits $1000 cash into the Penguins Bank. On the same day, David Smith negotiates a loan for $4000. By how much has the money supply changed?
A)It has increased by $3000.
B)It has decreased by $3000.
C)It has increased by $4000.
D)It has increased by $5000.
2
The currency held by banks is considered to be part of what definition of money?
A)M1
B)M2
C)M3
D)Part of all three—M1, M2, and M3
E)Not part of any definition of money
3
If Guy and Laraine both have chequing accounts at the same bank and Guy writes a cheque for $1000, payable to Laraine, what will happen to the bank’s accounts?
A)They will not be affected.
B)Assets and liabilities will both decrease by $1000.
C)Liabilities will decline and the bank’s equity will increase by $1000.
D)Reserves and demand deposits will both decrease by $1000.
E)Demand deposits will increase and loans to customers will decrease by $1000.
4
Which of the following statements is correct if a bank is holding excess reserves?
A)It is in a position to make additional loans.
B)Its reserves exceed its loans.
C)It is making above-normal profits.
D)Its actual reserves are less than its targeted reserves.
E)Its loans to customers exceed its required loans.
5
Suppose that the Just Right Coffee Company negotiates a $100 000 loan from the Blackhawks Bank and takes $40 000 in the form of cash, leaving the remainder in its account. What has happened to the supply of money?
A)It has increased by $100 000.
B)It has decreased by $100 000.
C)It has increased by $40 000.
D)It has increased by $60 000.
E)It has not changed.





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