Canadian Financial Systems
Test Bank
Course Introduction
This course provides an in-depth exploration of the structure and functioning of Canadian financial systems, including the roles of banks, credit unions, insurance companies, and other financial intermediaries. Students will examine the regulatory frameworks governing financial institutions, the operations of financial markets, and the impact of monetary policy in Canada. The course also analyzes current issues such as financial innovation, risk management, and the effects of globalization on Canadas financial system, equipping students with a comprehensive understanding of how financial institutions and markets contribute to the countrys economic stability and growth.
Recommended Textbook
The Economics of Money Banking and Financial Markets 5th Canadian Edition by Frederic S. Mishkin
Available Study Resources on Quizplus
28 Chapters
3284 Verified Questions
3284 Flashcards
Source URL: https://quizplus.com/study-set/1564 Page 2
Chapter 1: Why Study Money, banking, and Financial Markets
Available Study Resources on Quizplus for this Chatper
111 Verified Questions
111 Flashcards
Source URL: https://quizplus.com/quiz/30953
Sample Questions
Q1) Everything else held constant,a weaker Canadian dollar will likely hurt ________.
A) textile exporters in Quebec
B) wheat farmers in Saskatchewan that sell domestically
C) automobile manufacturers in Ontario that use domestically produced inputs
D) furniture importers in British Columbia
Answer: D
Q2) Prior to all recessions,there has been a drop in ________.
A) inflation
B) the money stock
C) the rate of money growth
D) interest rates
Answer: C
Q3) It is true that inflation is a ________.
A) continual increase in the money supply
B) continuous fall in prices
C) decline in interest rates
D) continual increase in the price level
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: An Overview of the Financial System
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/30964
Sample Questions
Q1) Which of the following statements about the characteristics of debt and equity is false?
A) They can both be long-term financial instruments.
B) They can both be short-term financial instruments.
C) They both involve a claim on the issuer's income.
D) They both enable a corporation to raise funds.
Answer: B
Q2) Assume that you borrow $2000 at 10 percent annual interest to finance a new business project.For this loan to be profitable,the minimum amount this project must generate in annual earnings is ________.
A) $400
B) $201
C) $200
D) $199
Answer: B
Q3) Distinguish between a foreign bond and a Eurobond.
Answer: A foreign bond is sold in a foreign country and priced in that country's currency A Eurobond is sold in a foreign country and priced in a currency that is not that country's currency
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: What Is Money
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/30974
Sample Questions
Q1) When paper currency is decreed by governments as legal tender,legally it must be
A) paper currency backed by gold
B) a precious metal such as gold or silver
C) accepted as payment for debts
D) convertible into an electronic payment
Answer: C
Q2) Of the following,the largest is ________.
A) money market deposit accounts
B) demand deposits
C) M1+
D) M2+
Answer: D
Q3) Compared to an economy that uses a medium of exchange,in a barter economy
A) transaction costs are higher
B) transaction costs are lower
C) liquidity costs are higher
D) liquidity costs are lower
Answer: A
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Understanding Interest Rates
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/30975
Sample Questions
Q1) The ________ states that the nominal interest rate equals the real interest rate plus the expected rate of inflation.
A) Fisher equation
B) Keynesian equation
C) Monetarist equation
D) Marshall equation
Q2) The yield to maturity for a one-year discount bond equals the increase in price over the year,divided by the ________.
A) initial price
B) face value
C) interest rate
D) coupon rate
Q3) If the interest rate on a Real Return Bond is 2 percent and the interest rate on a Canada bond of similar maturity is 5 percent then ________ is equal to 3 percent.
A) the expected rate of inflation
B) the yield to maturity
C) current yield
D) expected interest rate
Q4) What is a coupon bond? Describe its basic properties.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: The Behaviour of Interest Rates
Available Study Resources on Quizplus for this Chatper
111 Verified Questions
111 Flashcards
Source URL: https://quizplus.com/quiz/30976
Sample Questions
Q1) When the price of a bond decreases,all else equal,the bond demand curve
A) shifts right
B) shifts left
C) does not shift
D) inverts
Q2) In Keynes's liquidity preference framework,________.
A) the demand for bonds must equal the supply of money
B) the demand for money must equal the supply of bonds
C) an excess demand of bonds implies an excess demand for money
D) an excess supply of bonds implies an excess demand for money
Q3) In the figure above,a factor that could cause the demand for bonds to decrease (shift to the left)is ________.
A) an increase in the expected return on bonds relative to other assets
B) a decrease in the expected return on bonds relative to other assets
C) an increase in wealth
D) a reduction in the riskiness of bonds relative to other assets
Q4) Everything else held constant,would an increase in volatility of stock prices have any impact on the demand for rare coins? Why or why not?
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: The Risk and Term Structure of Interest Rates
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/30977
Sample Questions
Q1) The additional incentive that the purchaser of a Treasury security requires to buy a long-term security rather than a short-term security is called the ________.
A) risk premium
B) term premium
C) tax premium
D) market premium
Q2) If the expected path of 1-year interest rates over the next five years is 1 percent,2 percent,3 percent,4 percent,and 5 percent,the expectations theory predicts that the bond with the highest interest rate today is the one with a maturity of ________.
A) two years
B) three years
C) four years
D) five years
Q3) An inverted yield curve predicts that short-term interest rates ________.
A) are expected to rise in the future
B) will rise and then fall in the future
C) will remain unchanged in the future
D) will fall in the future
To view all questions and flashcards with answers, click on the resource link above.
8
Chapter 7: The Stock Market, the Theory of Rational
Expectations, and the Efficient Market Hypothesis
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/30978
Sample Questions
Q1) The value of any investment is found by computing the ________.
A) present value of all future sales
B) present value of all future liabilities
C) future value of all future expenses
D) present value of all future cash flows
Q2) An expectation may fail to be rational if ________.
A) relevant information was not available at the time the forecast is made
B) relevant information is available but ignored at the time the forecast is made
C) information changes after the forecast is made
D) information was available to insiders only
Q3) Studies of mutual fund performance indicate that mutual funds that outperformed the market in one time period usually ________.
A) beat the market in the next time period
B) beat the market in the next two subsequent time periods
C) beat the market in the next three subsequent time periods
D) do not beat the market in the next time period
Q4) Describe the Price Earnings Valuation method for stocks.
Q5) What rights does ownership interest give stockholders?
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: An Economic Analysis of Financial Structure
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/30979
Sample Questions
Q1) Solutions to the moral hazard problem include ________.
A) low net worth
B) monitoring and enforcement of restrictive covenants
C) greater reliance on equity contracts and less on debt contracts
D) greater reliance on debt contracts than financial intermediaries
Q2) The ________ problem helps to explain why the private production and sale of information cannot eliminate ________.
A) free-rider; adverse selection
B) free-rider; moral hazard
C) principal-agent; adverse selection
D) principal-agent; moral hazard
Q3) Since they require less monitoring of firms,________ contracts are used more frequently than ________ contracts to raise capital.
A) debt; equity
B) equity; debt
C) debt; loan
D) equity; stock
Q4) Explain the problem of asymmetric information,adverse selection and moral hazard,and why these problems are important for the financial system.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Financial Crises
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/30980
Sample Questions
Q1) During the ABCP saga,The Bank of Canada ________.
A) shut down all non-bank sponsored conduits
B) refused to accept ABCPs as collateral for loans to banks
C) provided liquidity as a lender to the market
D) was bailed out by the CDIC
Q2) Between 1995 and 2007,Ireland had an average annual GDP growth rate of ________.
A) 10.1 percent
B) 6.3 percent
C) 8.3 percent
D) 5.7 percent
Q3) In Canada,an early symptom of the U.S.subprime mortgage market problem was the ________.
A) financial engineering of the asset-backed commercial paper market
B) freezing of the asset-backed commercial paper market
C) increase of the asset-backed commercial paper market
D) restructuring of the asset-backed commercial paper market
Q4) Describe an asset-price bubble.
Q5) What two key factors trigger speculative attacks leading to currency crises in emerging market countries?
Q6) What is debt deflation?
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Economic Analysis of Financial Regulation
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/30954
Sample Questions
Q1) The government safety net creates both an adverse selection problem and a moral hazard problem.Explain.
Q2) The Depository Institutions Deregulation and Monetary Control Act of 1980
A) separated investment banks and commercial banks
B) restricted the use of ATS accounts
C) imposed restrictive usury ceilings on large agricultural loans
D) increased deposit insurance from $40,000 to $100,000
Q3) A problem with the too-big-to-fail policy is that it ________ the incentives for ________ by big banks.
A) increases; moral hazard
B) decreases; moral hazard
C) decreases; adverse selection
D) increases; adverse selection
Q4) The CDIC does not insure term deposits with an initial maturity date of more than
A) 5 years
B) 2 years
C) 1 year
D) 90 days
Page 12
To view all questions and flashcards with answers, click on the resource link above.
Chapter 11: Banking Industry: Structure and Competition
Available Study Resources on Quizplus for this Chatper
112 Verified Questions
112 Flashcards
Source URL: https://quizplus.com/quiz/30955
Sample Questions
Q1) In September 2008,the Reserve Primary Fund,a money market mutual fund,found itself in the situation know as "breaking the buck." This means that ________.
A) they could no longer afford to redeem shares at the par value of $1
B) they required shareholders to contribute a dollar more in fees each month
C) shareholders were able to redeem shares for more than a $1
D) shares earned more than a dollar in interest
Q2) Which of the following are true statements?
A) Schedule I banks have more powers than Schedule II banks.
B) A Schedule II bank may enter the Canadian banking industry only as a Schedule II bank.
C) A Schedule II bank may have a significant shareholder (more than 10 percent) for up to 10 years after chartering.
D) A foreign bank may enter the Canadian banking industry only as a Schedule III bank.
Q3) Explain why the profitability of traditional banking has declined and how banks have responded.
Q4) Describe how was the Eurocurrencies market created.
Q5) What are the adjustable-rate mortgages?
Q6) Why did the interest rate volatility of the 1970s spur financial innovation?
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Nonbank Finance
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/30956
Sample Questions
Q1) Who assists in the initial sale of securities in the secondary market?
A) The Bank of Canada
B) Securities brokers
C) Business finance companies
D) Investment banks
Q2) A corporation acquires new funds only when its securities are sold ________.
A) in the primary market by an investment bank
B) in the primary market by a stock exchange broker
C) in the secondary market by a securities dealer
D) in the secondary market by a commercial bank
Q3) ________ policies have no cash value and provide insurance only.
A) Endowment insurance
B) Term life insurance
C) Permanent insurance
D) Annuity insurance
Q4) How does the economic concept of moral hazard apply to the lending activities of insurers? Provide an example.
Q5) Describe the underwriting process.
Q6) Why are consumers better off obtaining credit from sources other than consumer finance companies?
Page 14
To view all questions and flashcards with answers, click on the resource link above.
Chapter 13: Banking and the Management of Financial Institutions
Available Study Resources on Quizplus for this Chatper
135 Verified Questions
135 Flashcards
Source URL: https://quizplus.com/quiz/30957
Sample Questions
Q1) When a new depositor opens a chequing account at the First National Bank,the bank's assets ________ and its liabilities ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
Q2) Of the following,which would be the first choice for a bank facing a reserve deficiency?
A) Call in loans
B) Borrow from the Bank of Canada
C) Sell securities
D) Borrow from other banks
Q3) When a $10 cheque written on the First National Bank is deposited in an account at CIBC,then ________.
A) the liabilities of the First National Bank increase by $10
B) the reserves of the First National Bank increase by $ 10
C) the liabilities of CIBC increase by $10
D) the assets of CIBC fall by $10
Q4) What is a loan sale and how does it work?
Page 15
To view all questions and flashcards with answers, click on the resource link above.
Chapter 14: Risk Management With Financial Derivatives
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/30958
Sample Questions
Q1) A financial contract that obligates one party to exchange a set of payments it owns for another set of payments owned by another party is called a ________.
A) cross hedge
B) cross call option
C) cross put option
D) swap
Q2) By buying a long $100,000 futures contract for 115,you agree to pay ________.
A) $100,000 for $115,000 face value bonds
B) $115,000 for $100,000 face value bonds
C) $86,956 for $100,000 face value bonds
D) $86,956 for $115,000 face value bonds
Q3) A put option gives the seller ________.
A) the right to sell the underlying security
B) the obligation to sell the underlying security
C) the right to buy the underlying security
D) the obligation to buy the underlying security
Q4) Where are financial futures traded? Describe that market.
Q5) What is the value of a call option at expiration? use an appropriate graph to show the profit and loses of the buyer and seller of a call option.
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Central Banks and the Bank of Canada
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/30959
Sample Questions
Q1) The European Central Bank is located in ________.
A) Frankfurt
B) London
C) Paris
D) Rome
Q2) Which of the following are entities of the Federal Reserve System?
A) Federal Reserve Banks
B) The FOMC
C) The Board of Advisors
D) Both A and B
Q3) The case for Bank of Canada independence includes the idea that ________.
A) a politically insulated Bank of Canada would be more concerned with long-run objectives and thus be a defender of a sound dollar and a stable price level
B) a Bank of Canada under the control of the government might make the so-called political business cycle more pronounced
C) the principal-agent problem is perhaps worse for the Bank than for politicians since the former does not answer to the voters on election day
D) Only A and B of the above.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 16: The Money Supply Process
Available Study Resources on Quizplus for this Chatper
166 Verified Questions
166 Flashcards
Source URL: https://quizplus.com/quiz/30960
Sample Questions
Q1) A bank has excess reserves of $10,000 and demand deposit liabilities of $100,000 when the desired reserve ratio is 20 percent.If the reserve ratio is raised to 25 percent,the bank's excess reserves will be ________.
A) -$5,000
B) -$1,000
C) $1,000
D) $5,000
Q2) Everything else held constant,a decrease in the desired reserve ratio will mean
A) a decrease in the money supply
B) an increase in the money supply
C) a decrease in chequable deposits
D) an increase in advances to banks
Q3) The monetary base minus currency in circulation equals ________.
A) reserves
B) the borrowed base
C) the nonborrowed base
D) advances to banks
Q4) How do changes in the desired reserve ratio affect the money multiplier?
Q5) How changes in the nonborrowed monetary base affect the money supply?
Page 18
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: Tools of Monetary Policy
Available Study Resources on Quizplus for this Chatper
109 Verified Questions
109 Flashcards
Source URL: https://quizplus.com/quiz/30961
Sample Questions
Q1) The lower limit of the operating band for the overnight interest rate defines
A) the bank rate
B) the prime rate
C) the rate the Bank of Canada pays LVTS participants with positive settlement balances at the end of the banking day
D) the rate the Bank of Canada charges LVTS participants with negative settlement balances at the end of the banking day
Q2) If the Bank of Canada expects the economy to to be exceeding its capacity,it ________ the operating band for the overnight interest rate.
A) lowers
B) raises
C) leaves unchanged
D) stabilizes
Q3) The interest rate on loans of reserves from one bank to another is ________.
A) the bank rate
B) the fed funds rate
C) the discount rate
D) the overnight rate
To view all questions and flashcards with answers, click on the resource link above.
Page 19
Chapter 18: The Conduct of Monetary Policy: Strategy and Tactics
Available Study Resources on Quizplus for this Chatper
106 Verified Questions
106 Flashcards
Source URL: https://quizplus.com/quiz/30962
Sample Questions
Q1) During the 1960s and early 1970s,the Bank of Canada used ________ as the intermediate target in the conduct of monetary policy.
A) the interest rate
B) the exchange rate
C) the monetary base
D) None of the above
Q2) The rate of inflation increases when ________.
A) the unemployment rate equals the NAIRU
B) the unemployment rate exceeds the NAIRU
C) the unemployment rate is less than the NAIRU
D) the unemployment rate increases faster than the NAIRU increases
Q3) Current estimates of NAIRU place it between ________ and ________.
A) 4 percent; 6 percent
B) 4 percent; 20 percent
C) 1 percent; 3 percent
D) 1 percent; 4 percent
Q4) Explain and demonstrate graphically how targeting nonborrowed reserves can result in overnight rate instability.
Q6) What criteria apply when choosing a policy instrument? Page 20
Q5) Why has the ECB seemed to have decided to try to "have its cake and eat it,too"?
To view all questions and flashcards with answers, click on the resource link above.
Page 21
Chapter 19: The Foreign Exchange Market
Available Study Resources on Quizplus for this Chatper
129 Verified Questions
129 Flashcards
Source URL: https://quizplus.com/quiz/30963
Sample Questions
Q1) An increase in the domestic interest rate causes the demand for domestic assets to ________ and the domestic currency to ________,everything else held constant. A) increase; appreciate B) increase; depreciate C) decrease; appreciate D) decrease; depreciate
Q2) ________ in the domestic interest rate causes the demand for domestic assets to ________ and the domestic currency to depreciate,everything else held constant.
A) An increase; increase B) An increase; decrease C) A decrease; increase D) A decrease; decrease
Q3) Explain the interest parity condition.
Q4) What are the factors that affect exchange rates in the long-run?
Q5) Explain how trade barriers affect the exchange rates in the long-run
Q6) Explain how productivity affects exchange rates in the long-run
Q7) In the model of the demand and supply of dollar assets use a graph to explain how a change in the foreign interest rate affects the equilibrium exchange rate.
Page 22
To view all questions and flashcards with answers, click on the resource link above.
Chapter 20: The International Financial System
Available Study Resources on Quizplus for this Chatper
143 Verified Questions
143 Flashcards
Source URL: https://quizplus.com/quiz/30965
Sample Questions
Q1) Two reasons for an industrialized country to adopt an exchange-rate targeting regime are if the country ________ conduct successful monetary policy on its own,and if the country wants to ________ integration of the domestic economy with its neighbors.
A) cannot; encourage
B) cannot; discourage
C) can; encourage
D) can; discourage
Q2) Under the Bretton Woods system,a country running a balance of payments surplus ________ international reserves,and had to implement ________ monetary policy to weaken its currency.
A) lost; expansionary
B) lost; contractionary
C) gained; expansionary
D) gained; contractionary
Q3) Which of the following is not a disadvantage of exchange-rate targeting?
A) It relies on a stable money-inflation relationship.
B) The targeting country gives up an independent monetary policy.
C) The targeting country is left open for a speculative attack.
D) It can weaken the accountability of policymakers.
To view all questions and flashcards with answers, click on the resource link above. Page 23
Chapter 21: Quantity Theory, inflation, and the Demand for Money
Available Study Resources on Quizplus for this Chatper
111 Verified Questions
111 Flashcards
Source URL: https://quizplus.com/quiz/30966
Sample Questions
Q1) The Baumol-Tobin analysis suggests that an increase in the brokerage fee for buying and selling bonds will cause the demand for money to ________ and the demand for bonds to ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
Q2) In the Baumol-Tobin model,as interest rates increase ________.
A) the amount of cash held for transaction purposes falls and velocity and interest rates are positively correlated
B) the amount of cash held for transaction purposes falls and velocity and interest rates are negatively correlated
C) the amount of cash held for transaction purposes rises and velocity and interest rates are positively correlated
D) the amount of cash held for transaction purposes rises and velocity and interest rates are negatively correlated
Q3) Explain the transactions motive for holding money in Keynes's liquidity preference theory
To view all questions and flashcards with answers, click on the resource link above. Page 24
Chapter 22: The Is Curve
Available Study Resources on Quizplus for this Chatper
139 Verified Questions
139 Flashcards
Source URL: https://quizplus.com/quiz/30967
Sample Questions
Q1) An increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift ________ and the equilibrium level of aggregate output to ________,everything else held constant.
A) up; rise
B) up; fall
C) down; rise
D) down; fall
Q2) In the simple Keynesian framework,declines in planned investment spending that produce high unemployment can be offset by raising ________.
A) taxes
B) government spending
C) consumer confidence
D) business confidence
Q3) The ________ describes points for which the goods market is in equilibrium.
A) LM curve
B) IS curve
C) consumption function
D) investment schedule
Q4) Describe Keynes's equilibrium condition and what it implies.
To view all questions and flashcards with answers, click on the resource link above. Page 25
Chapter 23: The Monetary Policy and Aggregate Demand
Curves
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/30968
Sample Questions
Q1) An increase in spending that results from expansionary ________ policy causes the interest rate to ________,everything else held constant.
A) fiscal; rise
B) fiscal; fall
C) incomes; rise
D) incomes; fall
Q2) Everything else held constant,a depreciation of the domestic currency will cause the IS curve to shift to the ________ and aggregate demand will ________.
A) right; increase
B) right; decrease
C) left; increase
D) left; decrease
Q3) Everything else held constant,an autonomous easing of monetary policy will cause ________.
A) the quantity of aggregate demand to increase
B) the quantity of aggregate demand to decrease
C) aggregate demand to decrease
D) aggregate demand to increase
Q4) Describe how the Bank of Canada would apply the Taylor principle.
To view all questions and flashcards with answers, click on the resource link above. Page 26
Chapter 24: Aggregate Demand and Supply Analysis
Available Study Resources on Quizplus for this Chatper
120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/30969
Sample Questions
Q1) Everything else held constant,when output is ________ the natural rate level,wages will begin to ________,increasing short-run aggregate supply.
A) above; fall
B) above; rise
C) below; fall
D) below; rise
Q2) An unfavourable supply shock causes ________ to ________.
A) aggregate demand; increase
B) aggregate demand; decrease
C) short-run aggregate supply; decrease
D) short-run aggregate supply; increase
Q3) In deriving the aggregate demand curve a ________ price level ________ the money supply in real terms,raises interest rates,and ________ the equilibrium level of aggregate output.
A) higher; reduces; raises
B) higher; reduces; lowers
C) lower; increases; raises
D) lower; increases; lowers
Q4) Explain why the short-run aggregate supply curve has a positive slope.
To view all questions and flashcards with answers, click on the resource link above. Page 27
Chapter 25: Monetary Policy Theory
Available Study Resources on Quizplus for this Chatper
147 Verified Questions
147 Flashcards
Source URL: https://quizplus.com/quiz/30970
Sample Questions
Q1) Which of the following is most likely to lead to inflationary monetary policy?
A) Declining oil prices
B) Resolution of conflict in the Middle East
C) The enactment of a free-trade agreement with Mexico
D) Rising unemployment
Q2) When using reduced-form evidence to evaluate monetary policy and find that M affects Y,________.
A) it is possible that we may suffer from reverse causation
B) we are sure that there is no reverse causation
C) there is never adverse selection
D) there is never moral hazard
Q3) Evidence that examines whether one variable has an effect on another by simply looking directly at the relationship between the two variables is ________.
A) reduced-form evidence
B) organizational-model evidence
C) direct-model evidence
D) structural-model evidence
Q4) Demonstrate graphically and explain the short-run and long-run effects of an unanticipated monetary expansion in the new classical model.
To view all questions and flashcards with answers, click on the resource link above. Page 28
Chapter 26: The Role of Expectations in Monetary Policy
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/30971
Sample Questions
Q1) The U.S.government can play an important role in establishing the credibility of anti-inflation policy by ________.
A) demonstrating fiscal responsibility
B) monitoring the Fed
C) conducting fiscal policy
D) all of the above
Q2) To bring credibility to the Bank of Canada,Gerald Bouey,the governor created
A) double digit inflation
B) two severe recessions in the 1980s
C) a reorganization with the Bank of Canada
D) a new measure of monetary aggregates
Q3) Some economists contend that a policy of shifting the aggregate demand curve will be costly because it produces more volatility in both the price level and output.These economists likely are advocates of ________ policy.
A) supply-side
B) discretionary
C) demand-management
D) nondiscretionary
To view all questions and flashcards with answers, click on the resource link above.
Page 29
Chapter 27: Transmission Mechanisms of Monetary Policy
Available Study Resources on Quizplus for this Chatper
108 Verified Questions
108 Flashcards
Source URL: https://quizplus.com/quiz/30972
Sample Questions
Q1) A criticism of the monetarist autonomous expenditure variable is that ________.
A) some types of autonomous expenditure do not affect aggregate demand
B) some types of autonomous expenditure affect aggregate demand before the expenditure occurs
C) some types of autonomous expenditure affect aggregate demand only long after they occur
D) Keynesians do not think that autonomous expenditure affects aggregate demand
Q2) When the Bank of Canada has an interest rate target,________ output might lead to a ________ money supply.
A) higher; higher
B) higher; lower
C) higher; stable
D) lower; lower
Q3) A rise in stock prices ________ the net worth of firms and so leads to ________ investment spending because of the reduction in moral hazard.
A) raises; higher
B) raises; lower
C) reduces; higher
D) reduces; lower
To view all questions and flashcards with answers, click on the resource link above.
Page 30
Chapter 28: The ISLM Model
Available Study Resources on Quizplus for this Chatper
107 Verified Questions
107 Flashcards
Source URL: https://quizplus.com/quiz/30973
Sample Questions
Q1) The situation in which expansionary fiscal policy does not lead to a rise in aggregate output is referred to as ________.
A) fiscal neutrality
B) a recession
C) complete crowding out
D) inflation
Q2) Using the ISLM model,show graphically and explain the effects of a monetary contraction.What is the effect on the equilibrium interest rate and level of output?
Q3) Everything else held constant,if aggregate output is to the ________ of the LM curve,then there is an excess demand of money which will cause the interest rate to
A) right; fall
B) right; rise
C) left; fall
D) left; rise
Q4) When is the targeting of the money supply preferred to the interest-rate target? support your answer with the appropriate diagram.
Q5) Describe the key assumption that drives Keynes's ISLM model.
To view all questions and flashcards with answers, click on the resource link above. Page 31