Question 1

When we say that money serves as a medium of exchange, we mean that it is:

Accepted Answer

A)   a way to keep some of our wealth in a readily spendable form for future use.
B)   a means of payment.
C)   a monetary unit for measuring and comparing the relative values of goods.
D)   declared as legal tender by the government.E) C) and D)
F) None of the above

Question 2

When we say that money serves as a store of value, we mean that it is:

Accepted Answer

A)   a way to keep some of our wealth in a readily spendable form for future use.
B)   a means of payment.
C)   a monetary unit for measuring and comparing the relative values of goods.
D)   declared as legal tender by the government.E) A) and D)
F) A) and C)

Question 3

When we say that money serves as a medium of exchange, we mean that it is:

Accepted Answer

A)   a way to keep some of our wealth in a readily spendable form for future use.
B)   a means of payment.
C)   a monetary unit for measuring and comparing the relative values of goods.
D)   declared as legal tender by the government.E) A) and D)
F) B) and D) B

Question 4

Refer to the information below which shows the demand deposits and actual reserves of a banking system. When the desired reserve ratio is 20 percent, the money creating potential of the entire banking system is:

Accepted Answer

A)   $4,000.
B)   $6,000.
C)   $8,000.
D)   $10,000.E) C) and D)
F) A) and D)

Question 5

Which of the following describes the fundamental identity embodied in a balance sheet?

Accepted Answer

A)   Net Worth plus Assets equal Liabilities
B)   Assets plus Liabilities equal Net Worth
C)   Assets equal Liabilities plus Net Worth
D)   Assets plus Reserves equal Net WorthE) None of the above
F) All of the above

Question 6

Chartered banks increase the supply of money when they purchase either personal IOUs or government bonds from businesses and households.

Accepted Answer

A) True 
 B)False

Question 7

A basic argument for using the M1 concept of money is that:

Accepted Answer

A)   it includes all of the important financial assets that have any degree of liquidity.
B)   the government collects data for the components of M1, but does not do so for M2 and M2+.
C)   its components are superior to other financial assets as a store of value.
D)   its components are directly and immediately spendable.E) A) and B)
F) All of the above

Question 8

Subprime mortgage loans refer to:

Accepted Answer

A)   low-interest rate loans by financial institutions to home buyers with higher-than -average credit risk.
B)   high-interest rate loans by financial institutions to home buyers with higher-than -average credit risk.
C)   high-interest rate loans by financial institutions to home buyers with no credit risk.
D)   high-interest rate loans by financial institutions to home buyers with lower-than -average credit risk.E) None of the above
F) All of the above

Question 9

In 2011, the value of M2++ in Canada was about:

Accepted Answer

A)   $182 billion.
B)   $1092 billion.
C)   $233 billion.
D)   $2063 billion.E) A) and C)
F) All of the above

Question 10

Demand deposits are:

Accepted Answer

A)   debts of chartered banks and other financial institutions.
B)   debts of the Bank of Canada.
C)   credits of the Bank of Canada.
D)   credits of chartered banks and other financial institutions.E) B) and C)
F) A) and B) A

Question 11

Money and banking in Canada are federal responsibilities.

Accepted Answer

A) True 
 B)False

Question 12

A bank owns a 10-story office building. In the bank's balance sheet, this would be an example of:

Accepted Answer

A)   an asset.
B)   a liability.
C)   stock shares.
D)   a chequable deposit.E) A) and D)
F) All of the above

Question 13

Fiat money is valuable because:

Accepted Answer

A)   it is backed by gold.
B)   it is fractionally backed by gold.
C)   it is generally acceptable.
D)   it is convertible to gold.E) B) and D)
F) C) and D)

Question 14

The functions of money are to serve as a:

Accepted Answer

A)   resource allocator, method for accounting, and means of income distribution.
B)   unit of account, store of value, and medium of exchange.
C)   determinant of consumption, investment, and government spending.
D)   factor of production, exchange, and aggregate supply.E) None of the above
F) A) and B) B

Question 15

When the receipts given by goldsmiths to depositors were used to make purchases:

Accepted Answer

A)   the gold standard was created.
B)   existing banking laws were violated.
C)   the receipts became in effect paper money.
D)   a fractional reserve banking system was created.E) A) and C)
F) B) and C)

Question 16

If you write a cheque on a Saskatoon bank to purchase a new Honda Civic, you are employing money as:

Accepted Answer

A)   a medium of exchange.
B)   a store of value.
C)   a unit of account.
D)   all of the above.E) A) and B)
F) All of the above

Question 17

Assume Company X deposits $100,000 in cash in chartered Bank A. If no excess reserves exist at the time this deposit is made and the desired reserve ratio is 20, Bank A can increase the money supply by a maximum of:

Accepted Answer

A)   $50,000.
B)   $180,000.
C)   $80,000.
D)   $500,000.E) A) and C)
F) All of the above

Question 18

Coins and paper money are:

Accepted Answer

A)   debts of Chartered banks and savings institutions.
B)   debts of the Bank of Canada.
C)   credits of the Bank of Canada.
D)   credits of chartered banks and savings institutions.E) None of the above
F) A) and B)

Question 19

Suppose a chartered banking system has $100,000 of outstanding demand deposits and actual cash reserves of $35,000. If the desired reserve ratio is 20 percent, the banking system can expand the supply of money by the maximum amount of:

Accepted Answer

A)   $122,000.
B)   $175,000.
C)   $300,000.
D)   $75,000E) C) and D)
F) A) and B)

Question 20

Stock market price quotations best exemplify money serving as a:

Accepted Answer

A)   store of value.
B)   unit of account.
C)   medium of exchange.
D)   index of satisfaction.E) B) and D)
F) A) and B)

Exam 12: Money, Banking, and Money Creation

When we say that money serves as a medium of exchange, we mean that it is:

Correct AnswerverifiedShow Answer

When we say that money serves as a store of value, we mean that it is:

Correct AnswerverifiedShow Answer

When we say that money serves as a medium of exchange, we mean that it is:

Correct AnswerverifiedB

Refer to the information below which shows the demand deposits and actual reserves of a banking system. When the desired reserve ratio is 20 percent, the money creating potential of the entire banking system is:

Correct AnswerverifiedShow Answer

Which of the following describes the fundamental identity embodied in a balance sheet?

Correct AnswerverifiedShow Answer

Chartered banks increase the supply of money when they purchase either personal IOUs or government bonds from businesses and households.

Correct AnswerverifiedShow Answer

A basic argument for using the M1 concept of money is that:

Correct AnswerverifiedShow Answer

Subprime mortgage loans refer to:

Correct AnswerverifiedShow Answer

In 2011, the value of M2++ in Canada was about:

Correct AnswerverifiedShow Answer

Demand deposits are:

Correct AnswerverifiedA

Money and banking in Canada are federal responsibilities.

Correct AnswerverifiedShow Answer

A bank owns a 10-story office building. In the bank's balance sheet, this would be an example of:

Correct AnswerverifiedShow Answer

Fiat money is valuable because:

Correct AnswerverifiedShow Answer

The functions of money are to serve as a:

Correct AnswerverifiedB

When the receipts given by goldsmiths to depositors were used to make purchases:

Correct AnswerverifiedShow Answer

If you write a cheque on a Saskatoon bank to purchase a new Honda Civic, you are employing money as:

Correct AnswerverifiedShow Answer

Assume Company X deposits $100,000 in cash in chartered Bank A. If no excess reserves exist at the time this deposit is made and the desired reserve ratio is 20, Bank A can increase the money supply by a maximum of:

Correct AnswerverifiedShow Answer

Coins and paper money are:

Correct AnswerverifiedShow Answer

Suppose a chartered banking system has $100,000 of outstanding demand deposits and actual cash reserves of $35,000. If the desired reserve ratio is 20 percent, the banking system can expand the supply of money by the maximum amount of:

Correct AnswerverifiedShow Answer

Stock market price quotations best exemplify money serving as a:

Correct AnswerverifiedShow Answer

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B

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A

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B

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