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Exam 10: The Monetary System

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Question 101

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How does the Bank of Canada conduct open-market transactions?

A) It prints new currency.
B) It buys or sells government bonds from or to the public.
C) It lowers the bank rate.
D) It increases its lending to chartered banks.

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

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Question 102

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What is meant by the term "lender of last resort"? In what circumstances might the Bank of Canada be a lender of last resort?

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A lender of last resort is a lender to t...

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Question 103

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Which of the following is included in M1+?

Suppose the reserve ratio is 25 percent and the public holds $10 million in cash.Then the public decides to withdraw $5 million from the banks.How does the money supply eventually change?

Heather receives a payment in cash of $400 and she deposits it in a bank. a.If the banking system is 100 percent reserve,how does the money supply change? b.If the reserve requirement is 10 percent and the bank holds no excess reserve,how does the money supply change? c.If the reserve requirement is 10 percent and the bank holds an excess reserve of 2 percent,how does the money supply change?

What is the role of the Bank of Canada?

Suppose a bank has $200,000 in deposits and $150,000 in loans.What is its reserve ratio?

Gary's wealth is $1 million.Economists would say that Gary has $1 million worth of money.

Jeremiah deposits in a bank an amount of $1000 that he had been holding at home in a jar for a long time. a.If the banking system is 100 percent reserve,how does the money supply change? b.If the reserve requirement is 10 percent and the bank holds no excess reserves,how does the money supply change? c.If the reserve requirement is 10 percent and the bank holds an excess reserve of 2 percent,how does the money supply change?

What is the difference between the reserve ratio and the reserve requirement? Which is generally larger?

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

As banks create money,they create wealth.

Which statement best describes bank runs today?

Which of the following is included in M2 but not in M1+?

The use of money allows trade to be roundabout.

Which list contains only actions that increase the money supply?

The Bank of Canada is a privately operated commercial bank.

A bank has $200 reserves,$800 loans,$400 securities,$1200 deposits,and $100 debt. a)Calculate the bank's capital. b)Calculate the bank's leverage ratio. c)Suppose there is a stock market boom,so that the bank's assets increase by 2 percent.What is the percentage change in the bank's capital? What is the change in the bank's capital in dollars? d)Suppose that,instead of stock market boom,some borrowers default on their debt so that the bank's assets decrease by 2 percent.How much is now the bank's capital?

Joe wants to trade eggs for sausage.Lashonda wants to trade eggs for orange juice.Joe and Lashonda have a double coincidence of wants.

What is current Canadian currency?