Question 1

Suppose the desired reserve ratio is 10 percent, and the Bank of Canada buys a $5,000 security from a depository institution.How is the money supply affected, using the simple multiplier?

Accepted Answer

A)   The money supply increases by $5,000. 
B)   The money supply decreases by $5,000. 
C)   The money supply increases by $50,000. 
D)   The money supply decreases by $50,000.E) B) and C)
F) None of the above

Question 2

What is the overnight rate?

Accepted Answer

A)   the interest rate paid when taxpayers pay overdue taxes 
B)   the interest rate paid when one bank borrows reserves from another bank 
C)   the interest rate paid when banks make loans to the federal government 
D)   the interest rate paid when the federal debt is refinancedE) A) and D)
F) C) and D)

Question 3

Consider the Bank of Canada's sale of Canadian government securities in its open market operations.What type of policy is this?

Accepted Answer

A)   It is a contractionary policy because it lowers the amount of total reserves in the banking system. 
B)   It is a contractionary policy because it lowers the amount of required reserves in the banking system. 
C)   It is an expansionary policy because it raises the amount of total and excess reserves in the banking system. 
D)   It is an expansionary policy because it raises the amount of excess reserves and lowers the amount of required reserves in the banking system.E) B) and C)
F) C) and D)

Question 4

What essential factor enables chartered banks to create money?

Accepted Answer

A)   desired reserves 
B)   excess reserves 
C)   provincial and local government securities 
D)   net worthE) A) and D)
F) A) and C)

Exam 14: Banking and the Money Supply

Suppose the desired reserve ratio is 10 percent, and the Bank of Canada buys a $5,000 security from a depository institution.How is the money supply affected, using the simple multiplier?

Correct Answer
verified

What is the overnight rate?

Correct Answer
verified

Consider the Bank of Canada's sale of Canadian government securities in its open market operations.What type of policy is this?

Correct Answer
verified

What essential factor enables chartered banks to create money?

Correct Answer
verified

Exam 14: Banking and the Money Supply

Suppose the desired reserve ratio is 10 percent, and the Bank of Canada buys a $5,000 security from a depository institution.How is the money supply affected, using the simple multiplier?

Correct AnswerverifiedShow Answer

What is the overnight rate?

Correct AnswerverifiedShow Answer

Consider the Bank of Canada's sale of Canadian government securities in its open market operations.What type of policy is this?

Correct AnswerverifiedShow Answer

What essential factor enables chartered banks to create money?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified