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1 | |
The fact that money is acceptable as a means of purchasing goods and services without engaging in barter is an example of its ______ function. |
| | A) | Unit of account |
| | B) | Medium of exchange |
| | C) | Store of value |
| | D) | None of the above |
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2 | |
The fact that money "enables people to transfer purchasing power from the present to the future" refers to the ______ function of money. |
| | A) | Medium of exchange |
| | B) | Unit of account |
| | C) | Store of value |
| | D) | None of the above |
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3 | |
The fact that the values of different goods and services can be expressed in terms of a single measure, such as dollars, reflects the _______ function of money. |
| | A) | Unit of account |
| | B) | Store of value |
| | C) | Medium of exchange |
| | D) | None of the above |
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4 | |
Which of the following would be part of M2 money supply? |
| | A) | Currency |
| | B) | Savings accounts |
| | C) | Demand deposits |
| | D) | All of the above |
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5 | |
Credit cards... |
| | A) | Are of example of M1 money supply |
| | B) | Are an example of M2+ money supply |
| | C) | Are just like currency because they can purchase goods and services. |
| | D) | Are not classified as money, but rather a short-term loan from the bank. |
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6 | |
Which of the following contributes to the fact that currency and demand deposits are money, whereas Monopoly money is not? |
| | A) | Acceptability |
| | B) | Legal tender |
| | C) | Relative scarcity |
| | D) | All of the above |
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7 | |
Which of the following is not a characteristic of the money supply in Canada? |
| | A) | The money supply is backed by nothing more than the government's ability to keep the value of Canadian money stable. |
| | B) | Canada's fiat money is currently backed by gold deposits at the Bank of Canada |
| | C) | The greater the volume of transactions in the Canadian economy, the greater the economy's demand for money. |
| | D) | The fact that Canada's currency is legal tender means that it must be accepted in payment of debt. |
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8 | |
Suppose that the Consumer Price level is currently at 1 (its base year level). If, during the next year, the price level rises to 1.1, then... |
| | A) | The value of the dollar rises from $1 to $1.10 |
| | B) | The value of the dollar falls from $1 to $0.80 |
| | C) | The value of the dollar rises from $0.9 to $1.00 |
| | D) | The value of the dollar falls from $1.00 to $0.91 |
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9 | |
The value of the Canadian dollar is... |
| | A) | Positively related to Canada's average price level |
| | B) | Inversely related to Canada's average price level |
| | C) | Directly related to Canada's average price level |
| | D) | None of the above |
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10 | |
Rapid, or runaway, inflation... |
| | A) | Tends to increase the demand for paper money |
| | B) | Will reduce the purchasing power of money only slightly |
| | C) | May cause people to abandon the use of money as a store of value |
| | D) | None of the above |
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11 | |
If John gives his landlord a $300 rent cheque, then... |
| | A) | John has transferred his bank's indebtedness from himself to the landlord |
| | B) | John has transferred his bank's indebtedness from the landlord to himself. |
| | C) | The landlord will accept the cheque if she feels confident she can convert it into currency on demand. |
| | D) | Choices 1 and 3 are correct. |
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12 | |
The Canadian chartered bank with the greatest amount of financial assets is... |
| | A) | The Canadian Imperial Bank of Commerce |
| | B) | The Royal Bank |
| | C) | Toronto Dominion Bank |
| | D) | The Bank of Montreal |
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13 | |
Canadian chartered banks hold back reserves in order to... |
| | A) | To provide loans to customers |
| | B) | To invest in Government of Canada securities. |
| | C) | To meet everyday cash withdrawals by customers |
| | D) | None of the above. |
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14 | |
Which of the following is true of Canadian chartered banks? |
| | A) | They hold back only a small percentage of their deposits as reserves. |
| | B) | They hold back all of their deposits as reserves |
| | C) | They hold back none of their deposits as reserves. |
| | D) | None of the above |
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15 | |
Which of the following represents a liability on a chartered bank's balance sheet? |
| | A) | Reserves |
| | B) | Demand deposits |
| | C) | Loans |
| | D) | Government of Canada securities |
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16 | |
Under what condition would money lose its function as a store of value? |
| | A) | Low inflation |
| | B) | Interest rates rise |
| | C) | High inflation |
| | D) | An increase in aggregate supply due to lower wage levels. |
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17 | |
If Bob took $1,000 out of a personal chequing account at TD bank, and placed it in a six-month term deposit, then... |
| | A) | M1 would increase, while M2 would decrease. |
| | B) | M2 would increase, while M1 would decrease |
| | C) | The Canadian money supply would increase |
| | D) | The Canadian money supply would decrease |
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18 | |
One problem with linking the money supply to gold, or some other commodity, is... |
| | A) | That a large increase in gold production could increase the money supply to the extent that it causes inflation. |
| | B) | A sharp decrease in gold production could reduce the money supply too quickly, and cause the economy to go into recession. |
| | C) | That because of choices 1 and 2, it is better for the Bank of Canada to manage the money supply. |
| | D) | All of the above |
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19 | |
Which of the following is true? |
| | A) | There is an inverse relationship between the value of the Canadian dollar and the CPI in Canada |
| | B) | There is a positive relationship between the value of the Canadian dollar, and the CPI in Canada |
| | C) | D=1-P, where D=value of the Canadian dollar and P=price level, as measured by the Consumer Price Index (CPI) |
| | D) | None of the above |
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20 | |
"The interest rate that banks charge their best corporate customers" is called... |
| | A) | The Bank Rate |
| | B) | The corporate rate |
| | C) | The Prime rate |
| | D) | None of the above |
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21 | |
Which of the following is true of "smart cards"? |
| | A) | They represent a form of electronic money |
| | B) | They may be used to pay bills in the future, alongside the internet. |
| | C) | There has been resistance to them in Canada thus far, since smart cards do not provide for the interest-free "float" that credit cards do. |
| | D) | All of the above are correct. |
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22 | |
Which of the following might be a potential problem with electronic money? |
| | A) | It will be difficult to purchase goods and services with it. |
| | B) | The Bank of Canada may find it hard to exert control over electronic money, as it does with a paper money/currency supply. |
| | C) | Bill payments will be difficult to make with this type of money. |
| | D) | It will be difficult for consumers to keep track of any electronic money they have at a given point in time. |
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23 | |
The two basic functions of Chartered banks and savings institutions are... |
| | A) | To hold money deposits of businesses and households and conduct monetary policy |
| | B) | To make loans to the public so as to make profits and sell Bank of Canada securities |
| | C) | To hold money deposits of businesses and households and make loans to the public so as to make profits. |
| | D) | None of the above |
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2002 McGraw-Hill Higher Education