Question 1

Net exports would most likely decrease when there is a(n) :

Accepted Answer

A)  expansionary monetary policy or a contractionary fiscal policy.
B)  restrictive monetary policy or a contractionary fiscal policy.
C)  expansionary monetary policy or an expansionary fiscal policy.
D)  restrictive monetary policy or an expansionary fiscal policy.E) A) and B)
F) A) and C)

Question 2

An increase in nominal GDP increases the demand for money because:

Accepted Answer

A)  interest rates will rise.
B)  more money is needed to finance a larger volume of transactions.
C)  bond prices will fall.
D)  the opportunity cost of holding money will decline.E) C) and D)
F) A) and B)

Question 3

Assume that a single chartered bank has no excess reserves and that the desired reserve ratio is 20 percent.If this bank sells a bond for $1,000 to the Bank of Canada, it can expand its loans by a maximum of:

Accepted Answer

A)  $1000
B)  $2000
C)  $200
D)  $800E) B) and C)
F) A) and D)

Question 4

Monetary policy is thought to be:

Accepted Answer

A)  equally effective in moving the economy out of a recession as in controlling inflation.
B)  more effective in moving the economy out of a recession than in controlling inflation.
C)  only effective in moving the economy out of a recession.
D)  more effective in controlling inflation than in moving the economy out of a recession.E) B) and C)
F) All of the above

Question 5

Under some conditions, proper domestic monetary policy may be at odds with the goal of correcting a trade imbalance because:

Accepted Answer

A)  changes in the domestic interest rate cause changes in domestic investment spending.
B)  changes in the domestic interest rate tend to cause changes in the international value of the dollar.
C)  the domestic interest rate varies inversely with the value of the dollar.
D)  changes in the interest rate cause changes in domestic saving.E) None of the above
F) A) and B)

Question 6

m and Sm, an interest rate of i3 is not sustainable because: A) the supply of bonds in the bond market will decline and the interest rate will rise. B) the supply of bonds in the bond market will increase and the interest rate will decline. C) the demand for bonds in the bond market will decline and the interest rate will rise. D) the demand for bonds in the bond market will rise and the interest rate will fall." class="answers-bank-image d-inline" rel="preload" > Refer to the above market for money diagram.Given Dm and Sm, an interest rate of i3 is not sustainable because:

Accepted Answer

A)  the supply of bonds in the bond market will decline and the interest rate will rise.
B)  the supply of bonds in the bond market will increase and the interest rate will decline.
C)  the demand for bonds in the bond market will decline and the interest rate will rise.
D)  the demand for bonds in the bond market will rise and the interest rate will fall.E) None of the above
F) B) and D)

Question 7

A disequilibrium in the market for money is mainly corrected via a change in:

Accepted Answer

A)  bond prices.
B)  the price level.
C)  saving levels.
D)  the money supply.E) A) and D)
F) B) and D)

Question 8

The most important day-to-day monetary instrument that the Bank of Canada uses to achieve the desired interest rate and therefore the price stability is:

Accepted Answer

A)  open-market operations.
B)  the bank rate.
C)  the government expenditure.
D)  the prime interest rate.E) B) and C)
F) A) and C)

Question 9

Which of the following statements is correct?

Accepted Answer

A)  Interest rates and bond prices vary directly.
B)  Interest rates and bond prices vary inversely.
C)  Interest rates and bond prices are unrelated.
D)  Interest rates and bond prices vary directly during inflations and inversely during recessions.E) A) and B)
F) A) and C)

Question 10

It is assumed that households and businesses want to hold for transactions purposes an amount of money equal to one-half of the GDP.The table shows the amounts of money that households and businesses want to hold as an asset at various interest rates.  Refer to the information above.If the GDP is $200 and the interest rate is 6, what total amount of money will households and businesses want to hold?

Accepted Answer

A)  $120
B)  $140
C)  $160
D)  $180E) B) and C)
F) C) and D)

Question 11

The asset demand for money:

Accepted Answer

A)  is unrelated to both the interest rate and the level of GDP.
B)  varies inversely with the rate of interest.
C)  varies inversely with the level of real GDP.
D)  varies directly with the level of nominal GDP.E) B) and C)
F) A) and C)

Question 12

In which of the following instances can we be certain that the quantity of money demanded by the public will decrease?

Accepted Answer

A)  nominal GDP decreases and the interest rate decreases
B)  nominal GDP increases and the interest rate decreases
C)  nominal GDP decreases and the interest rate increases
D)  nominal GDP increases and the interest rate increasesE) B) and C)
F) A) and D)

Question 13

Because of the liquidity trap, the Bank of Canada's creation of billions of dollars in excess reserves during the great recession had little or no effect on lending by the chartered banks.

Accepted Answer

A) True 
 B)False

Question 14

The largest single liability of the Bank of Canada is its outstanding advances to chartered banks.

Accepted Answer

A) True 
 B)False

Question 15

Refer to the graphs below.The first graph shows the money market of an economy, and the second graph shows the market for goods and services in the economy. 1, AD2, and AD3 labels indicate the levels of investment spending associated with each AD curve.All figures are in billions.Qf is the full-employment level of real output.The interest rate in the economy is 4 percent.Which of the following should the monetary authorities do to achieve a non-inflationary full-employment level of real GDP? A) They should increase the money supply from $75 billion to $225 billion. B) They should decrease the money supply by $150 billion. C) They should decrease the money supply from $225 billion to $150 billion. D) They should increase the money supply by $200 billion." class="answers-bank-image d-inline" rel="preload" > 1, AD2, and AD3 labels indicate the levels of investment spending associated with each AD curve.All figures are in billions.Qf is the full-employment level of real output.The interest rate in the economy is 4 percent.Which of the following should the monetary authorities do to achieve a non-inflationary full-employment level of real GDP? A) They should increase the money supply from $75 billion to $225 billion. B) They should decrease the money supply by $150 billion. C) They should decrease the money supply from $225 billion to $150 billion. D) They should increase the money supply by $200 billion." class="answers-bank-image d-inline" rel="preload" > In the above diagrams, the numbers in the parentheses after the AD1, AD2, and AD3 labels indicate the levels of investment spending associated with each AD curve.All figures are in billions.Qf is the full-employment level of real output.The interest rate in the economy is 4 percent.Which of the following should the monetary authorities do to achieve a non-inflationary full-employment level of real GDP?

Accepted Answer

A)  They should increase the money supply from $75 billion to $225 billion.
B)  They should decrease the money supply by $150 billion.
C)  They should decrease the money supply from $225 billion to $150 billion.
D)  They should increase the money supply by $200 billion.E) A) and B)
F) A) and D)

Question 16

Which of the following statements is not correct?

Accepted Answer

A)  Given the supply of money, a decline in the demand for money will tend to reduce the equilibrium GDP.
B)  Given the supply of money, the equilibrium interest rate will vary directly with the level of money GDP.
C)  Given the demand for money, the equilibrium interest rate will vary inversely with the supply of money.
D)  Given the supply of money, the equilibrium interest rate will vary directly with the demand for money.E) A) and B)
F) B) and C)

Question 17

Which of the following is correct?

Accepted Answer

A)  The asset demand for money is downward sloping because the opportunity cost of holding money declines as the interest rate rises.
B)  The asset demand for money is downward sloping because the opportunity cost of holding money increases as the interest rate rises.
C)  The transactions demand for money is downward sloping because the opportunity cost of holding money varies inversely with the interest rate.
D)  The asset demand for money is downward sloping because bond prices and the interest rate are directly related.E) B) and C)
F) A) and D)

Question 18

A restrictive monetary policy in Canada is most likely to:

Accepted Answer

A)  depreciate the international value of the dollar and increase Canadian net exports.
B)  depreciate the international value of the dollar and decrease Canadian net exports.
C)  appreciate the international value of the dollar and increase Canadian net exports.
D)  appreciate the international value of the dollar and decrease Canadian net exports.E) All of the above
F) B) and C)

Question 19

An expansionary monetary policy may be more effective than a restrictive monetary policy because chartered banks may decide to hold a large quantity of excess reserves.

Accepted Answer

A) True 
 B)False

Question 20

If the money GDP is $600 billion and, on the average, each dollar is spent three times per year, then the amount of money demanded for transactions purposes:

Accepted Answer

A)  will be $1800 billion.
B)  will be $600 billion.
C)  will be $200 billion.
D)  cannot be determined from the information given.E) A) and D)
F) A) and C)

Exam 15: Part B: Interest Rates and Monetary Policy

An increase in nominal GDP increases the demand for money because:

Correct Answer
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Which of the following statements is correct?

Correct Answer
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A restrictive monetary policy in Canada is most likely to:

Correct Answer
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A disequilibrium in the market for money is mainly corrected via a change in:

Correct Answer
verified

Which of the following is correct?

Correct Answer
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Correct Answer
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An expansionary monetary policy may be more effective than a restrictive monetary policy because chartered banks may decide to hold a large quantity of excess reserves.

Correct Answer
verified

In which of the following instances can we be certain that the quantity of money demanded by the public will decrease?

Correct Answer
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Which of the following statements is not correct?

Correct Answer
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Assume that a single chartered bank has no excess reserves and that the desired reserve ratio is 20 percent.If this bank sells a bond for $1,000 to the Bank of Canada, it can expand its loans by a maximum of:

Correct Answer
verified

The most important day-to-day monetary instrument that the Bank of Canada uses to achieve the desired interest rate and therefore the price stability is:

Correct Answer
verified

Because of the liquidity trap, the Bank of Canada's creation of billions of dollars in excess reserves during the great recession had little or no effect on lending by the chartered banks.

Correct Answer
verified

Correct Answer
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Net exports would most likely decrease when there is a(n) :

Correct Answer
verified

Monetary policy is thought to be:

Correct Answer
verified

Under some conditions, proper domestic monetary policy may be at odds with the goal of correcting a trade imbalance because:

Correct Answer
verified

Refer to the above market for money diagram.Given D_m and S_m, an interest rate of i₃ is not sustainable because:

Correct Answer
verified

The asset demand for money:

Correct Answer
verified

The largest single liability of the Bank of Canada is its outstanding advances to chartered banks.

Correct Answer
verified

If the money GDP is $600 billion and, on the average, each dollar is spent three times per year, then the amount of money demanded for transactions purposes:

Correct Answer
verified

Exam 15: Part B: Interest Rates and Monetary Policy

An increase in nominal GDP increases the demand for money because:

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

A restrictive monetary policy in Canada is most likely to:

Correct AnswerverifiedShow Answer

A disequilibrium in the market for money is mainly corrected via a change in:

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An expansionary monetary policy may be more effective than a restrictive monetary policy because chartered banks may decide to hold a large quantity of excess reserves.

Correct AnswerverifiedShow Answer

In which of the following instances can we be certain that the quantity of money demanded by the public will decrease?

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Assume that a single chartered bank has no excess reserves and that the desired reserve ratio is 20 percent.If this bank sells a bond for $1,000 to the Bank of Canada, it can expand its loans by a maximum of:

Correct AnswerverifiedShow Answer

The most important day-to-day monetary instrument that the Bank of Canada uses to achieve the desired interest rate and therefore the price stability is:

Correct AnswerverifiedShow Answer

Because of the liquidity trap, the Bank of Canada's creation of billions of dollars in excess reserves during the great recession had little or no effect on lending by the chartered banks.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Net exports would most likely decrease when there is a(n) :

Correct AnswerverifiedShow Answer

Monetary policy is thought to be:

Correct AnswerverifiedShow Answer

Under some conditions, proper domestic monetary policy may be at odds with the goal of correcting a trade imbalance because:

Correct AnswerverifiedShow Answer

Refer to the above market for money diagram.Given Dm and Sm, an interest rate of i3 is not sustainable because:

Correct AnswerverifiedShow Answer

The asset demand for money:

Correct AnswerverifiedShow Answer

The largest single liability of the Bank of Canada is its outstanding advances to chartered banks.

Correct AnswerverifiedShow Answer

If the money GDP is $600 billion and, on the average, each dollar is spent three times per year, then the amount of money demanded for transactions purposes:

Correct AnswerverifiedShow Answer

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Refer to the above market for money diagram.Given D_m and S_m, an interest rate of i₃ is not sustainable because:

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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