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) B) and C)
F) A) and C)

Question 2

An increase in the money supply will tend to:

Accepted Answer

A)   lower interest rates and lower the equilibrium GDP.
B)   lower interest rates and increase the equilibrium GDP.
C)   increase interest rates and increase the equilibrium GDP.
D)   increase interest rates and lower the equilibrium GDP.E) All of the above
F) B) and C) B

Question 3

t is the transactions demand for money,Dm is the total demand for money,and Sm is the supply of money.If the interest rate was 4 percent,the asset demand for money would be: A)  $125 B)  $175 C)  $200 D)  $225" class="answers-bank-image d-inline" rel="preload" >
-Refer to the above graph,in which Dt is the transactions demand for money,Dm is the total demand for money,and Sm is the supply of money.If the interest rate was 4 percent,the asset demand for money would be:

Accepted Answer

A)   $125
B)   $175
C)   $200
D)   $225E) B) and C)
F) A) and C)

Question 4

Lower bond prices reduce interest rates.

Accepted Answer

A) True 
 B)False

Question 5

Assume that the desired reserve ratio is 20 percent.Suppose that the Bank of Canada sells $500 of government securities to chartered banks and buys $500 of securities from individuals,who deposit the cash in chequing accounts.
-Refer to the above information.As a result of these transactions,reserves in the banking system will:

Accepted Answer

A)   remain unchanged.
B)   rise by $100.
C)   fall by $100.
D)   fall by $1,000.E) All of the above
F) B) and C)

Question 6

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) A) and B)
F) C) and D)

Question 7

Recently,the Bank of Canada has communicated changes in its monetary policy by announcing changes in its policy targets for the:

Accepted Answer

A)   growth of the money supply.
B)   overnight loans rate.
C)   prime interest rate.
D)   Canadian dollar-foreign currency exchange rate.E) All of the above
F) None of the above

Question 8

In terms of the aggregate demand and aggregate supply model,an expansionary monetary policy is designed to shift the:

Accepted Answer

A)   aggregate demand curve rightward.
B)   aggregate demand curve leftward.
C)   aggregate supply curve rightward.
D)   aggregate supply curve leftward.E) B) and C)
F) A) and C)

Question 9

In the cause-effect chain,a restrictive monetary policy increases the money supply,decreases the interest rate,increases investment spending,and increases aggregate demand.

Accepted Answer

A) True 
 B)False

Question 10

-Refer to the above information.All else equal,the transaction demand for money in this table would increase if:

Accepted Answer

A)   nominal GDP increased.
B)   the interest rate fell.
C)   the supply of money increased.
D)   the supply of money decreased.E) A) and B)
F) None of the above

Question 11

The interest rate at which the Bank of Canada lends to chartered banks is called:

Accepted Answer

A)   the prime rate.
B)   the short-term rate.
C)   the bank rate.
D)   the government bonds rate.E) A) and D)
F) A) and C)

Question 12

A newspaper headline reads: "Bank of Canada Raises the overnight rate for third time this year." This headline indicates that the Bank of Canada is most likely trying to:

Accepted Answer

A)   stimulate the economy.
B)   increase the money supply.
C)   reduce the cost of credit.
D)   reduce inflationary pressures in the economy.E) B) and C)
F) A) and B)

Question 13

All else equal,when the Bank of Canada engages in a restrictive monetary policy,the price of government securities tends to:

Accepted Answer

A)   fall.
B)   rise.
C)   remain constant.
D)   move in the same direction as the bonds' interest rate yield.E) All of the above
F) B) and D)

Question 14

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) All of the above
F) B) and C)

Question 15

When a chartered bank borrows from the Bank of Canada:

Accepted Answer

A)   the supply of money automatically increases.
B)   it indicates that the chartered bank is unsound financially.
C)   the chartered bank's lending ability is increased.
D)   the chartered bank's reserves are reduced.E) None of the above
F) B) and D)

Question 16

Assume the desired reserve ratio is 25 percent and the Bank of Canada buys $4 million of securities from the public.As a result of this transaction the supply of money is:

Accepted Answer

A)   not directly affected,but the money-creating potential of the chartered banking system is increased by $12 million.
B)   directly increased by $4 million and the money-creating potential of the chartered banking system is increased by $16 million.
C)   directly reduced by $4 million and the money-creating potential of the chartered banking system is decreased by $12 million.
D)   directly increased by $4 million and the money-creating potential of the chartered banking system is increased by $12 million.E) None of the above
F) All of the above

Question 17

If the quantity of money demanded exceeds the quantity supplied:

Accepted Answer

A)   the supply-of-money curve will shift to the left.
B)   the demand-for-money curve will shift to the right.
C)   the interest rate will fall.
D)   the interest rate will rise.E) None of the above
F) A) and D)

Question 18

Columns (1) and (2) indicate the transactions demand (Dt) for money and columns (1) and (3) show the asset demand (Da) for money:
-Refer to the above information.These data suggest that the amount of money that society wishes to hold as an asset:

Accepted Answer

A)   varies directly with the interest rate.
B)   varies inversely with the interest rate.
C)   varies inversely with the GDP.
D)   is independent of the interest rate.E) C) and D)
F) B) and C) B

Question 19

A decrease in the nominal GDP,other things remaining the same,will decrease both the total demand for money and the equilibrium rate of interest in the economy.

Accepted Answer

A) True 
 B)False  False

Question 20

Columns (1) and (2) indicate the transactions demand (Dt) for money and columns (1) and (3) show the asset demand (Da) for money:
-Refer to the above information.These data suggest that the amount of money demanded for transactions purposes:

Accepted Answer

A)   varies directly with the interest rate.
B)   varies inversely with the interest rate.
C)   varies inversely with the GDP.
D)   is independent of the interest rate.E) B) and D)
F) None of the above

Exam 15: Interest Rates and Monetary Policy

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

Correct Answer
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An increase in the money supply will tend to:

Correct Answer
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B

-Refer to the above graph,in which D_t is the transactions demand for money,D_m is the total demand for money,and S_m is the supply of money.If the interest rate was 4 percent,the asset demand for money would be:

Correct Answer
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Lower bond prices reduce interest rates.

Correct Answer
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Correct Answer
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Correct Answer
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Recently,the Bank of Canada has communicated changes in its monetary policy by announcing changes in its policy targets for the:

Correct Answer
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In terms of the aggregate demand and aggregate supply model,an expansionary monetary policy is designed to shift the:

Correct Answer
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In the cause-effect chain,a restrictive monetary policy increases the money supply,decreases the interest rate,increases investment spending,and increases aggregate demand.

Correct Answer
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-Refer to the above information.All else equal,the transaction demand for money in this table would increase if:

Correct Answer
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The interest rate at which the Bank of Canada lends to chartered banks is called:

Correct Answer
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A newspaper headline reads: "Bank of Canada Raises the overnight rate for third time this year." This headline indicates that the Bank of Canada is most likely trying to:

Correct Answer
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All else equal,when the Bank of Canada engages in a restrictive monetary policy,the price of government securities tends to:

Correct Answer
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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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When a chartered bank borrows from the Bank of Canada:

Correct Answer
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Assume the desired reserve ratio is 25 percent and the Bank of Canada buys $4 million of securities from the public.As a result of this transaction the supply of money is:

Correct Answer
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If the quantity of money demanded exceeds the quantity supplied:

Correct Answer
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Columns (1) and (2) indicate the transactions demand (D_t) for money and columns (1) and (3) show the asset demand (D_a) for money: -Refer to the above information.These data suggest that the amount of money that society wishes to hold as an asset:

Correct Answer
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B

A decrease in the nominal GDP,other things remaining the same,will decrease both the total demand for money and the equilibrium rate of interest in the economy.

Correct Answer
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False

Columns (1) and (2) indicate the transactions demand (D_t) for money and columns (1) and (3) show the asset demand (D_a) for money: -Refer to the above information.These data suggest that the amount of money demanded for transactions purposes:

Correct Answer
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Exam 15: Interest Rates and Monetary Policy

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

Correct AnswerverifiedShow Answer

An increase in the money supply will tend to:

Correct AnswerverifiedB

-Refer to the above graph,in which Dt is the transactions demand for money,Dm is the total demand for money,and Sm is the supply of money.If the interest rate was 4 percent,the asset demand for money would be:

Correct AnswerverifiedShow Answer

Lower bond prices reduce interest rates.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Recently,the Bank of Canada has communicated changes in its monetary policy by announcing changes in its policy targets for the:

Correct AnswerverifiedShow Answer

In terms of the aggregate demand and aggregate supply model,an expansionary monetary policy is designed to shift the:

Correct AnswerverifiedShow Answer

In the cause-effect chain,a restrictive monetary policy increases the money supply,decreases the interest rate,increases investment spending,and increases aggregate demand.

Correct AnswerverifiedShow Answer

-Refer to the above information.All else equal,the transaction demand for money in this table would increase if:

Correct AnswerverifiedShow Answer

The interest rate at which the Bank of Canada lends to chartered banks is called:

Correct AnswerverifiedShow Answer

A newspaper headline reads: "Bank of Canada Raises the overnight rate for third time this year." This headline indicates that the Bank of Canada is most likely trying to:

Correct AnswerverifiedShow Answer

All else equal,when the Bank of Canada engages in a restrictive monetary policy,the price of government securities tends to:

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

When a chartered bank borrows from the Bank of Canada:

Correct AnswerverifiedShow Answer

Assume the desired reserve ratio is 25 percent and the Bank of Canada buys $4 million of securities from the public.As a result of this transaction the supply of money is:

Correct AnswerverifiedShow Answer

If the quantity of money demanded exceeds the quantity supplied:

Correct AnswerverifiedShow Answer

Columns (1) and (2) indicate the transactions demand (Dt) for money and columns (1) and (3) show the asset demand (Da) for money: -Refer to the above information.These data suggest that the amount of money that society wishes to hold as an asset:

Correct AnswerverifiedB

A decrease in the nominal GDP,other things remaining the same,will decrease both the total demand for money and the equilibrium rate of interest in the economy.

Correct AnswerverifiedFalse

Columns (1) and (2) indicate the transactions demand (Dt) for money and columns (1) and (3) show the asset demand (Da) for money: -Refer to the above information.These data suggest that the amount of money demanded for transactions purposes:

Correct AnswerverifiedShow Answer

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B

-Refer to the above graph,in which D_t is the transactions demand for money,D_m is the total demand for money,and S_m is the supply of money.If the interest rate was 4 percent,the asset demand for money would be:

Correct Answer
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Correct Answer
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Columns (1) and (2) indicate the transactions demand (D_t) for money and columns (1) and (3) show the asset demand (D_a) for money: -Refer to the above information.These data suggest that the amount of money that society wishes to hold as an asset:

Correct Answer
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B

Correct Answer
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False

Columns (1) and (2) indicate the transactions demand (D_t) for money and columns (1) and (3) show the asset demand (D_a) for money: -Refer to the above information.These data suggest that the amount of money demanded for transactions purposes:

Correct Answer
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