Question 1

Suppose the Bank of Canada sells $2 billion of government bonds to the public, which pays for them by drawing cheques.As a result, chartered bank reserves will:

Accepted Answer

A)  increase by $10 billion.
B)  remain unchanged.
C)  decrease by $2 billion.
D)  increase by $2 billion.E) All of the above
F) B) and C)

Question 2

Which line in the above graph would best reflect the slope of the asset demand for money curve?

Accepted Answer

A)  line 1
B)  line 2
C)  line 3
D)  line 4E) C) and D)
F) B) and C)

Question 3

The purchase of government securities from the public by the Bank of Canada will cause:

Accepted Answer

A)  chartered bank reserves to increase.
B)  the money supply to increase.
C)  demand deposits to increase.
D)  all of the above to occur.E) A) and B)
F) A) and C)

Question 4

In which case would the quantity of money demanded by the public tend to increase by the greatest amount?

Accepted Answer

A)  The interest rate increases and nominal GDP increases.
B)  The interest rate increases and nominal GDP decreases.
C)  The interest rate decreases and nominal GDP decreases.
D)  The interest rate decreases and nominal GDP increases.E) B) and D)
F) A) and C)

Question 5

Which of the following is the "nickname" of the central bank of the United States?, According to Image 15.1 Global Perspective

Accepted Answer

A)  Fed
B)  RBA
C)  ECB
D)  BOJE) A) and C)
F) A) and B)

Question 6

The equilibrium rate of interest in the market for money is determined by:

Accepted Answer

A)  the intersection of the supply of money and the asset demand for money.
B)  the intersection of the supply of money and the transactions demand for money.
C)  the intersection of the supply of money and the total demand for money.
D)  none of the above.E) A) and B)
F) None of the above

Question 7

Columns (1)  and (2)  indicate the transactions demand (Dt)  for money and columns (1)  and (3)  show the asset demand (Da)  for money: Refer to the above information.These data suggest that the amount of money demanded for transactions purposes:

Accepted Answer

A)  varies directly with the interest rate.
B)  varies inversely with the interest rate.
C)  varies inversely with the GDP.
D)  is independent of the interest rate.E) All of the above
F) A) and B)

Question 8

Refer to the above information.The equilibrium interest rate is:

Accepted Answer

A)  2 percent.
B)  4 percent.
C)  6 percent.
D)  8 percent.E) A) and B)
F) A) and C)

Question 9

The total quantity of money demanded is determined by:

Accepted Answer

A)  subtracting the asset demand for money from the transactions demand for money.
B)  adding the transactions demand for money to the asset demand for money.
C)  subtracting the transactions demand for money from nominal GDP.
D)  adding the asset demand for money to nominal GDP.E) A) and D)
F) B) and C)

Question 10

Quantitative easing refers to the purchasing of private sector assets by a country's central bank in order to provide liquidity to the financial system.

Accepted Answer

A) True 
 B)False

Question 11

If the amount of money demanded exceeds the amount supplied, it can be expected that the:

Accepted Answer

A)  demand-for-money curve will shift to the left.
B)  money supply curve will shift to the right.
C)  interest rate will rise.
D)  interest rate will fall.E) B) and C)
F) A) and B)

Question 12

Refer to the information below.The transactions demand for money in this market would graph as a:

Accepted Answer

A)  vertical line.
B)  horizontal line.
C)  line sloping downward and to the right.
D)  line sloping upward and to the right.E) B) and C)
F) C) and D)

Question 13

The transactions demand for money is most closely related to money functioning as a:

Accepted Answer

A)  unit of account.
B)  medium of exchange.
C)  store of value.
D)  both store of value and unit of account.E) None of the above
F) C) and D)

Question 14

If the Bank of Canada sells government securities to the public, which of the following transactions take place?

Accepted Answer

A)  The demand deposits of chartered banks are unchanged, but their reserves increase.
B)  The demand deposits and reserves of chartered banks both decrease.
C)  The demand deposits of chartered banks are unchanged, but their reserves decrease.
D)  The demand deposits and reserves of chartered banks are both unchanged.E) B) and C)
F) C) and D)

Question 15

Which line in the above graph would best reflect the slope of the transactions demand for money curve?

Accepted Answer

A)  line 1
B)  line 2
C)  line 3
D)  line 4E) B) and C)
F) C) and D)

Question 16

Which of the following best describes what occurs when monetary authorities sell government securities?

Accepted Answer

A)  There is a decrease in the size of chartered banks' excess reserves, the money supply increases, and interest rates fall, thereby causing a decrease in investment spending and real GDP.
B)  There is a decrease in the size of chartered banks' excess reserves, the money supply decreases, and the interest rates rise, thereby causing a decrease in investment spending and real GDP.
C)  There is a decrease in the size of chartered banks' excess reserves, the money supply decreases, and interest rates rise, thereby causing an increase in investment spending and real GDP.
D)  There is an increase in the size of chartered bank reserves, the money supply increases, and interest rates fall, thereby causing an increase in investment spending and real GDP.E) C) and D)
F) All of the above

Question 17

The problem of "cyclical asymmetry" refers to the notion that:

Accepted Answer

A)  monetary policy may be more successful in slowing expansions and controlling inflation than in extracting the economy from severe recession.
B)  the monetary authorities have been less willing to use an expansionary monetary policy than they have a restrictive monetary policy.
C)  cyclical downswings are typically of longer duration than cyclical upswings.
D)  an expansionary monetary policy can force an expansion of the money supply, but a restrictive monetary policy may not achieve a contraction of the money supply.E) C) and D)
F) B) and D)

Question 18

The price of government bonds and the interest rate received by a bond buyer are:

Accepted Answer

A)  negatively related.
B)  unrelated.
C)  positively related.
D)  independent of Bank of Canada open-market operations.E) A) and D)
F) A) and C)

Question 19

Assume the desired reserve ratio is 25 percent and the Bank of Canada buys $4 million of securities from the public.As a result of this transaction the supply of money is:

Accepted Answer

A)  not directly affected, but the money-creating potential of the chartered banking system is increased by $12 million.
B)  directly increased by $4 million and the money-creating potential of the chartered banking system is increased by $16 million.
C)  directly reduced by $4 million and the money-creating potential of the chartered banking system is decreased by $12 million.
D)  directly increased by $4 million and the money-creating potential of the chartered banking system is increased by $12 million.E) B) and D)
F) A) and C)

Question 20

To have an independent monetary policy and target inflation, the Bank of Canada must allow the Canadian Dollar to float.

Accepted Answer

A) True 
 B)False

Exam 15: Part B: Interest Rates and Monetary Policy

Suppose the Bank of Canada sells $2 billion of government bonds to the public, which pays for them by drawing cheques.As a result, chartered bank reserves will:

Correct AnswerverifiedShow Answer

The price of government bonds and the interest rate received by a bond buyer are:

Correct AnswerverifiedShow Answer

Quantitative easing refers to the purchasing of private sector assets by a country's central bank in order to provide liquidity to the financial system.

Correct AnswerverifiedShow Answer

The total quantity of money demanded is determined by:

Correct AnswerverifiedShow Answer

Which of the following is the "nickname" of the central bank of the United States?, According to Image 15.1 Global Perspective

Correct AnswerverifiedShow Answer

The equilibrium rate of interest in the market for money is determined by:

Correct AnswerverifiedShow Answer

The purchase of government securities from the public by the Bank of Canada will cause:

Correct AnswerverifiedShow Answer

If the amount of money demanded exceeds the amount supplied, it can be expected that the:

Correct AnswerverifiedShow Answer

In which case would the quantity of money demanded by the public tend to increase by the greatest amount?

Correct AnswerverifiedShow Answer

Which line in the above graph would best reflect the slope of the asset demand for money curve?

Correct AnswerverifiedShow Answer

If the Bank of Canada sells government securities to the public, which of the following transactions take place?

Correct AnswerverifiedShow Answer

Assume the desired reserve ratio is 25 percent and the Bank of Canada buys $4 million of securities from the public.As a result of this transaction the supply of money is:

Correct AnswerverifiedShow Answer

Which line in the above graph would best reflect the slope of the transactions demand for money curve?

Correct AnswerverifiedShow Answer

Refer to the information below.The transactions demand for money in this market would graph as a:

Correct AnswerverifiedShow Answer

Refer to the above information.The equilibrium interest rate is:

Correct AnswerverifiedShow Answer

Columns (1) and (2) indicate the transactions demand (Dt) for money and columns (1) and (3) show the asset demand (Da) for money: Refer to the above information.These data suggest that the amount of money demanded for transactions purposes:

Correct AnswerverifiedShow Answer

Which of the following best describes what occurs when monetary authorities sell government securities?

Correct AnswerverifiedShow Answer

The transactions demand for money is most closely related to money functioning as a:

Correct AnswerverifiedShow Answer

The problem of "cyclical asymmetry" refers to the notion that:

Correct AnswerverifiedShow Answer

To have an independent monetary policy and target inflation, the Bank of Canada must allow the Canadian Dollar to float.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Columns (1) and (2) indicate the transactions demand (D_t) for money and columns (1) and (3) show the asset demand (D_a) for money: Refer to the above information.These data suggest that the amount of money demanded for transactions purposes:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified