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 B)
F) All of the above

Question 2

If actual reserves in the banking system are $50,000, excess reserves are $5,000, and demand deposits are $225,000, then the money multiplier:

Accepted Answer

A)   is 10.
B)   is 5.
C)   is 4.
D)   cannot be determined from this information.E) None of the above
F) C) and D)

Question 3

The following is information about a banking system: new currency deposited in the system = $40 billion; desired reserve ratio = 20%; excess reserves prior to the new currency deposit = $0.
-Refer to the above information. The total demand deposit after the expansion of the money supply through loans is:

Accepted Answer

A)   $160 billion.
B)   $200 billion.
C)   $40 billion.
D)   $128 billion.E) A) and C)
F) None of the above

Question 4

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) All of the above

Question 5

Chartered bank reserves are an asset to chartered banks but a liability to the Bank of Canada holding them.

Accepted Answer

A) True 
 B)False

Question 6

The balance sheet below is for chartered bank EFG. Assume the desired reserve ratio is 25 percent. All figures are in billions.
 
-Refer to the above information. The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

Accepted Answer

A)   $140 and, $560.
B)   $51 and, $204.
C)   $16 and, $376.
D)   $16 and, $64.E) B) and C)
F) None of the above

Question 7

The granting of a $10,000 loan and the purchase of a $10,000 government securities from a securities dealer by a chartered bank have the same effect on the money supply.

Accepted Answer

A) True 
 B)False

Question 8

If the desired reserve ratio were 100 percent, the value of the money multiplier would be:

Accepted Answer

A)   0.
B)   1.
C)   10.
D)   100.E) All of the above
F) None of the above

Question 9

Currency and demand deposits are money because:

Accepted Answer

A)   they are backed by a precious metal.
B)   the government asserts that they are.
C)   they are "resting" in a chartered bank vault.
D)   they can be redeemed for an intrinsically valuable commodity such as gold.E) A) and D)
F) B) and C)

Question 10

If actual cash reserves in the banking system are $8,000, demand deposits are $70,000, and the desired reserve ratio is 10 percent, then excess reserves:

Accepted Answer

A)   are zero.
B)   are $1,000.
C)   are $2,000.
D)   cannot be determined from this information.E) B) and D)
F) C) and D)

Question 11

Which one of the following is presently preventing bank panics in Canada?

Accepted Answer

A)   the reserve requirement
B)   the fractional reserve system
C)   the gold standard
D)   deposit insuranceE) B) and D)
F) B) and C)

Question 12

If the desired reserve ratio is 10 percent, how much excess reserves does a bank acquire when a business deposits a $500 cheque drawn on another bank?

Accepted Answer

A)   $450
B)   $550
C)   $5000
D)   $500E) All of the above
F) B) and C)

Question 13

The following balance sheet is for the First National Bank. Assume the desired reserve ratio is 15 percent.
 
-Refer to the above data, this chartered bank has excess reserves of:

Accepted Answer

A)   $15,000.
B)   $18,000.
C)   $27,000.
D)   $32,000.E) B) and D)
F) All of the above

Question 14

The M2+ definition of the money supply includes:

Accepted Answer

A)   M1 plus the M2.
B)   M2 plus the coins and paper money held by the chartered banks.
C)   M2 plus the deposits at trust and mortgage companies, credit unions, caisses populaires, and government savings institutions, plus money market mutual funds and life insurance annuities.
D)   M2 plus the government securities held by the chartered banks.E) All of the above
F) A) and C)

Question 15

A bank which has liabilities of $150 billion and a net worth of $20 billion must have:

Accepted Answer

A)   excess reserves of $130 billion.
B)   assets of $150 billion.
C)   excess reserves of $150 billion.
D)   assets of $170 billion.E) A) and D)
F) B) and C)

Question 16

Fiat money refers to "near-monies."

Accepted Answer

A) True 
 B)False

Question 17

Refer to the information below. When the desired reserve ratio is 25 percent, the excess reserves of this single bank are:

Accepted Answer

A)   zero dollars.
B)   $1,000.
C)   $5,000.
D)   $30,000.E) A) and B)
F) None of the above

Question 18

Which of the following are all assets to a chartered bank?

Accepted Answer

A)   demand deposits, stock shares, and reserves
B)   vault cash, property, and reserves
C)   vault cash, property, and stock shares
D)   vault cash, stock shares, and demand depositsE) A) and B)
F) None of the above

Question 19

The supply of money increases when the public purchases government securities from chartered banks.

Accepted Answer

A) True 
 B)False

Question 20

Demand deposits are also called:

Accepted Answer

A)   chequing accounts.
B)   high-powered money.
C)   savings balances.
D)   Bank of Canada notes.E) B) and C)
F) A) and D)

Exam 12: Money, Banking, and Money Creation

Refer to the information below. When the desired reserve ratio is 25 percent, the excess reserves of this single bank are:

Correct Answer
verified

Demand deposits are also called:

Correct Answer
verified

Currency and demand deposits are money because:

Correct Answer
verified

A bank which has liabilities of $150 billion and a net worth of $20 billion must have:

Correct Answer
verified

The M2+ definition of the money supply includes:

Correct Answer
verified

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

Correct Answer
verified

The balance sheet below is for chartered bank EFG. Assume the desired reserve ratio is 25 percent. All figures are in billions. -Refer to the above information. The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

Correct Answer
verified

Demand deposits are classified as money because:

Correct Answer
verified

If the desired reserve ratio were 100 percent, the value of the money multiplier would be:

Correct Answer
verified

If the desired reserve ratio is 10 percent, how much excess reserves does a bank acquire when a business deposits a $500 cheque drawn on another bank?

Correct Answer
verified

Fiat money refers to "near-monies."

Correct Answer
verified

Which one of the following is presently preventing bank panics in Canada?

Correct Answer
verified

The following balance sheet is for the First National Bank. Assume the desired reserve ratio is 15 percent. -Refer to the above data, this chartered bank has excess reserves of:

Correct Answer
verified

If actual cash reserves in the banking system are $8,000, demand deposits are $70,000, and the desired reserve ratio is 10 percent, then excess reserves:

Correct Answer
verified

Chartered bank reserves are an asset to chartered banks but a liability to the Bank of Canada holding them.

Correct Answer
verified

The granting of a $10,000 loan and the purchase of a $10,000 government securities from a securities dealer by a chartered bank have the same effect on the money supply.

Correct Answer
verified

Which of the following are all assets to a chartered bank?

Correct Answer
verified

The supply of money increases when the public purchases government securities from chartered banks.

Correct Answer
verified

If actual reserves in the banking system are $50,000, excess reserves are $5,000, and demand deposits are $225,000, then the money multiplier:

Correct Answer
verified

Correct Answer
verified

Exam 12: Money, Banking, and Money Creation

Refer to the information below. When the desired reserve ratio is 25 percent, the excess reserves of this single bank are:

Correct AnswerverifiedShow Answer

Demand deposits are also called:

Correct AnswerverifiedShow Answer

Currency and demand deposits are money because:

Correct AnswerverifiedShow Answer

A bank which has liabilities of $150 billion and a net worth of $20 billion must have:

Correct AnswerverifiedShow Answer

The M2+ definition of the money supply includes:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The balance sheet below is for chartered bank EFG. Assume the desired reserve ratio is 25 percent. All figures are in billions. -Refer to the above information. The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

Correct AnswerverifiedShow Answer

Demand deposits are classified as money because:

Correct AnswerverifiedShow Answer

If the desired reserve ratio were 100 percent, the value of the money multiplier would be:

Correct AnswerverifiedShow Answer

If the desired reserve ratio is 10 percent, how much excess reserves does a bank acquire when a business deposits a $500 cheque drawn on another bank?

Correct AnswerverifiedShow Answer

Fiat money refers to "near-monies."

Correct AnswerverifiedShow Answer

Which one of the following is presently preventing bank panics in Canada?

Correct AnswerverifiedShow Answer

The following balance sheet is for the First National Bank. Assume the desired reserve ratio is 15 percent. -Refer to the above data, this chartered bank has excess reserves of:

Correct AnswerverifiedShow Answer

If actual cash reserves in the banking system are $8,000, demand deposits are $70,000, and the desired reserve ratio is 10 percent, then excess reserves:

Correct AnswerverifiedShow Answer

Chartered bank reserves are an asset to chartered banks but a liability to the Bank of Canada holding them.

Correct AnswerverifiedShow Answer

The granting of a $10,000 loan and the purchase of a $10,000 government securities from a securities dealer by a chartered bank have the same effect on the money supply.

Correct AnswerverifiedShow Answer

Which of the following are all assets to a chartered bank?

Correct AnswerverifiedShow Answer

The supply of money increases when the public purchases government securities from chartered banks.

Correct AnswerverifiedShow Answer

If actual reserves in the banking system are $50,000, excess reserves are $5,000, and demand deposits are $225,000, then the money multiplier:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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