Money and Banking Exam Review
Course Introduction
Money and Banking offers a comprehensive exploration of the modern financial system, focusing on the roles and functions of money, banking institutions, and central banks in the economy. The course examines how money is created and managed, the structure and operation of commercial banks, and the regulatory framework that governs the financial sector. Key topics include the monetary policy tools used by central banks, the process of credit creation, interest rate determination, financial intermediation, and the impact of banking on economic stability and growth. Through case studies and current events, students gain an understanding of the interactions between banking, government policies, and the broader economy.
Recommended Textbook
Macroeconomics 2nd Canadian Edition by Glenn Hubbard
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15 Chapters
4089 Verified Questions
4089 Flashcards
Source URL: https://quizplus.com/study-set/2832
Page 2
Chapter 1: Economics: Foundations and Models
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Suppose the extra cost of producing an extra million kilograms of french fries is $1 million.Then,McCain Foods Ltd.should make the extra french fries if they generate additional revenue of $1 million.
A)True
B)False
Answer: True
Q2) Who receives the most of what is produced in a market economy?
A)lawmakers and other politically favored groups
B)those who are willing and able to buy them
C)Everyone receives an equal amount.
D)people who earn the highest incomes
Answer: B
Q3) Explain why economics is considered a social science.
Answer: Economics is a social science because it studies the actions of individuals.As a social science,economics considers human behavior,particularly decision-making behavior,in every context.
Q4) Scarcity is a problem that will eventually disappear as technology advances.
A)True
B)False
Answer: False
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Chapter 2: Trade-Offs, Comparative Advantage, and the Market System
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311 Verified Questions
311 Flashcards
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Sample Questions
Q1) Refer to Table 2.5.What is Haley's opportunity cost of making a bracelet?
A)3/4 of a bracelet
B)3 bracelets
C)1 1/3 necklaces
D)2 necklaces
Answer: C
Q2) In the desire to have a celebrity's image protected to prevent it from being used in ways he would not approve,a celebrity's estate
A)will probably not be successful,since there are no laws regulating this kind of use in Canada.
B)will have to be granted a patent declaring the celebrity's image a new product,and this will give the estate protection for 7 years.
C)can rely on Canadian laws that protect intellectual property rights to prevent the unauthorized use of his image.
D)will most likely be more successful in developing countries than in high-income countries,since property regulations are better enforced in developing countries.
Answer: C
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Chapter 3: Where Prices Come From: The Interaction of
Supply and Demand
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314 Verified Questions
314 Flashcards
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Sample Questions
Q1) Which of the following would shift the supply curve for energy drinks to the left?
A)a decrease in the expected future price of energy drinks
B)an increase in consumer income (assuming that energy drinks are normal goods)
C)a decrease in the number of firms that produce energy drinks
D)a decrease in the price of an input used to produce energy drinks
Answer: C
Q2) Quantity supplied refers to the amount of a good or service that a firm is willing and able to supply at a given price.
A)True
B)False
Answer: True
Q3) The portion of the population over age 64 has risen from 8% in 1971 to 16% in 2015.Which of the goods is most likely to see an increase in demand as a result?
A)health care
B)university education
C)energy drinks
D)cars
Answer: A
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Chapter 4: GDP: Measuring Total Production and Income
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277 Verified Questions
277 Flashcards
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Sample Questions
Q1) In 2017,Kendall Ford,an automobile dealership,spent $20,000 on a new car lift for its repair shop,$2,000 on a new copy machine for its sales division,and $600,000 on Ford Motor company stock.Unsold cars and trucks were valued at $400,000 on January 1,2017,and unsold cars and trucks were valued at $900,000 on December 31,2017.What is Kendall Ford's total investment spending in 2017?
A)$22,000
B)$322,000
C)$522,000
D)$620,000
E)$1,022,000
Q2) A car that is produced in 2018 is not sold until 2019.According to the definition of GDP,in which year's GDP should it be counted?
A)2018
B)2019
C)Half of the sales price will count as part of 2018 GDP and half will count as part of 2019 GDP.
D)The production cost will count as part of 2018 GDP while the sales price will count as part of 2019 GDP.
E)It should not be counted in either years' GDP.
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Page 6
Chapter 5: Unemployment and Inflation
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300 Verified Questions
300 Flashcards
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Sample Questions
Q1) What is the natural rate of unemployment,and what types of unemployment constitute the natural rate of unemployment?
Q2) The real wage equals the nominal wage ________ the CPI,all times 100.
A)divided by
B)times
C)minus
D)plus
E)to the power of
Q3) The CPI is also referred to as
A)the GDP deflator.
B)the inflation-consumption index.
C)the cost-of-living index.
D)the producer price index.
E)the consumer profitability indicator.
Q4) The most important group not identified by the unemployment rate is A)seniors.
B)discouraged workers.
C)part-time workers seeking full-time work.
D)those under the minimum working age.
E)students.
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Chapter 6: Economic Growth, the Financial System, and Business Cycles
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262 Verified Questions
262 Flashcards
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Sample Questions
Q1) What is the name of the organization that officially defines business cycle peaks and troughs in Canada?
A)the Bureau of Labour Statistics
B)the Bank of Canada
C)Statistics Canada
D)the federal Department of Finance
E)There is no such organization in Canada.
Q2) If technological change increases the profitability of new investments for firms,then the ________ curve for loanable funds will shift to the ________.
A)supply: right
B)supply; left
C)demand; right
D)demand; left
Q3) What is human capital?
A)a slang term for the underground labour market
B)manufactured goods that are used to produce other goods
C)accumulated knowledge and skills acquired by a worker
D)the manager or owner of a business
E)the number of workers a firm can hire on short notice
Page 8
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Chapter 7: Long-Run Economic Growth: Sources and Policies
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280 Verified Questions
280 Flashcards
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Sample Questions
Q1) According to Douglass North,the Industrial Revolution occurred in England because
A)the British Parliament took control of the government and could credibly commit to upholding property rights.
B)the British monarchy took control of the government and pledged not to raise taxes arbitrarily.
C)the British courts became tied to the king and began to refuse to enforce property rights.
D)the British Parliament instituted a command economy structure and implemented a planned economy.
E)the British navy was the most powerful in the world.
Q2) Describe the process of "creative destruction" using a specific example.
Q3) Political stability is not a prerequisite to economic growth.
A)True
B)False
Q4) Increased foreign direct investment in India has contributed to its recent economic growth.
A)True
B)False
Page 9
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Chapter 8: Aggregate Expenditure and Output in the Short Run
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309 Verified Questions
309 Flashcards
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Sample Questions
Q1) Assume that inventories declined by more than analysts predicted.This implies that
A)planned aggregate expenditure was greater than real GDP.
B)planned aggregate expenditure was equal to real GDP.
C)planned aggregate expenditure was less than real GDP.
D)planned aggregate expenditure is unrelated to real GDP.
E)planned aggregate expenditure is likely to increase.
Q2) The ________ model focuses on the relationship between total spending and real GDP in the short run,assuming the price level is constant.
A)supply and demand
B)national income
C)aggregate expenditure
D)business cycle
E)aggregate demand model
Q3) Examples of assets that are included in household wealth would be
A)stocks,bonds,and savings accounts.
B)stocks,loans owed,and savings accounts.
C)stocks,bonds,and mortgages.
D)stocks,credit cards,and savings accounts.
E)stocks,bonds,and household appliances.
Page 10
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Chapter 9: Aggregate Demand and Aggregate Supply Analysis
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246 Verified Questions
246 Flashcards
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Sample Questions
Q1) Which of the following is considered a negative supply shock?
A)increasing investment in the economy causes the capital stock to rise
B)an unexpected increase in the price of natural gas
C)a decline in wages
D)an improvement in technology
E)a drop in investment spending
Q2) If the economy receives an influx of new workers from immigration,
A)the long-run aggregate supply curve will shift to the right.
B)the long-run aggregate supply curve will shift to the left.
C)we will move up along the long-run aggregate supply curve.
D)we will move down along the long-run aggregate supply curve.
E)the aggregate demand curve will shift to the left.
Q3) In the dynamic aggregated demand and aggregate supply model,if AD shifts faster than AS,
A)inflation occurs.
B)deflation occurs.
C)stagflation occurs.
D)disinflation occurs.
E)unemployment rises.
Q4) Why does the short-run aggregate supply curve slope upward?
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Chapter 10: Money, Banks, and the Bank of Canada
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285 Verified Questions
285 Flashcards
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Sample Questions
Q1) According to the quantity theory of money,inflation is caused by
A)the money supply growing slower than real GDP.
B)GDP growing faster than the money supply.
C)GDP growing at the same rate as the money supply.
D)the money supply growing faster than real GDP.
E)Government deficit spending.
Q2) Suppose that the desired reserve ratio is 20 percent and you deposit $50,000 of freshly minted currency given to you by the Bank of Canada into ScotiaBank.What is the potential increase in deposits in the banking system brought about by your deposit? What is the potential change in the money supply?
Q3) Which of the following people is not on the governing council of the Bank of Canada?
A)the governor of the Bank of Canada
B)the senior deputy governor of the Bank of Canada
C)the Minister of Finance
D)four deputy governors of the Bank of Canada
Q4) What are the four functions of money? Can something be considered money if it does not fulfill all four functions?
Q5) What is the principle monetary policy tool used by the Bank of Canada.Why?
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Chapter 11: Monetary Policy
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281 Verified Questions
281 Flashcards
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Sample Questions
Q1) The Bank of Canada
A)can easily distinguish the minor ups and downs of the economy from a recession.
B)can have difficulty distinguishing the minor ups and downs of the economy from a recession.
C)always times its policy responses correctly.
D)can easily determine if a drop in production means a recession is inevitable.
E)is legally barred from collecting the data it needs to effectively intervene in the economy.
Q2) Firms that participate in regular open market transactions with ________ are called primary dealers.
A)commercial banks
B)U.S.Treasury banks
C)the U.S.Federal Reserve
D)mortgage lenders
E)consumers and private borrowers
Q3) Use the money demand and money supply model to show graphically and explain the effect on interest rates of the Bank of Canada's open market purchase of government securities.
Q4) What problems can high inflation rates cause for the economy?
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Chapter 12: Fiscal Policy
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303 Verified Questions
303 Flashcards
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Sample Questions
Q1) The multiplier effect refers to the series of
A)autonomous increases in consumption spending that result from an initial increase in induced expenditures.
B)induced increases in consumption spending that result from an initial increase in autonomous expenditures.
C)autonomous increases in investment spending that result from an initial increase in induced expenditures.
D)induced increases in investment spending that result from an initial increase in autonomous expenditures.
E)induced increases in net exports that result from an initial increase in autonomous expenditures.
Q2) Suppose real GDP is currently $1.25 trillion and potential real GDP is $1.3 trillion.If the federal government increased government purchases by $50 billion,what would be the result on the economy?
Q3) Assuming a fixed amount of taxes and a closed economy,calculate the value of the government purchases multiplier,the tax multiplier,and the balanced budget multiplier if the marginal propensity to consume equals 0.75.
Q4) What is the difference between federal purchases and federal expenditures?
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Page 14
Chapter 13: Inflation, Unemployment, and Bank of Canada Policy
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265 Verified Questions
265 Flashcards
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Sample Questions
Q1) Refer to Figure 13.2.Suppose the economy is at point A.The Bank of Canada uses expansionary monetary policy to lower the unemployment rate permanently below the level associated with A.Which of the following will occur?
A)Inflation will accelerate in the long run.
B)Inflationary expectations will decline.
C)Unemployment will rise above the natural rate.
D)Unemployment will accelerate in the long run.
E)Inflation will be permanently lower in the long run.
Q2) When reducing the overnight rate was no longer seen as an option to deal with the global recession,some central banks began
A)reducing reserve ratios for commercial banks.
B)quantatative easing.
C)reducing tax rates.
D)selling large quantities of government securities.
E)destroying currency previously in circulation.
Q3) In a survey,Robert Shiller found that most workers believe that an increase in inflation will lead quickly to an increase in wages.
A)True
B)False
Page 15
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Chapter 14: Macroeconomics in an Open Economy
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280 Verified Questions
280 Flashcards
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Sample Questions
Q1) A real appreciation of the Canadian dollar is caused by either a nominal appreciation of the Canadian dollar,a rise in the foreign price level,or a fall in the Canadian price level.
A)True
B)False
Q2) The Canadian ________ account records relatively minor transactions,such as migrants' transfers; and sales and purchases of nonproduced,nonfinancial assets.
A)current
B)capital
C)financial
D)balance of trade
E)official settlements
Q3) An increase in capital inflows will
A)increase net foreign investment.
B)increase capital outflows.
C)decrease capital outflows.
D)increase the value of the domestic currency.
E)increase the current account balance.
Q4) Why is the balance of payments always zero?
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Chapter 15: The International Financial System
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228 Verified Questions
228 Flashcards
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Sample Questions
Q1) In the late 1990s,when foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely,they began to sell off their investments in Thailand and exchange the baht they received for dollars.This reduction in investment by foreigners is termed
A)foreign direct investment.
B)capital flight.
C)capital inflow.
D)stabilizing capitalization.
E)bank run.
Q2) Under the Bretton Woods system,U.S.dollars were redeemable for ________ only if the dollars were presented by a foreign central bank.
A)silver
B)the foreign central bank's home currency (i.e.,Canadian dollars for the Bank of Canada)
C)gold
D)U.S.Treasury bonds
E)foreign currency
Q3) Why might a developing country choose to peg the value of its currency to the U.S.dollar?
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Page 17