Question 1

Suppose the quantity of money supplied exceeds the quantity of money demanded.Which of the following best describes how the interest rate is affected?

Accepted Answer

A)   The interest rate will rise. 
B)   The interest rate will remain the same. 
C)   The interest rate will fall. 
D)   The interest rate will become negative.

Question 2

On which of the following does the Bank of Canada have the tightest grip?

Accepted Answer

A)   the prime rate 
B)   the overnight rate 
C)   the mortgage rate 
D)   the credit card rate

Question 3

Suppose the Bank of Canada increases the overnight rate.What are chartered banks likely to do?

Accepted Answer

A)   lower their prime rate 
B)   raise their prime interest rate 
C)   keep their prime lending rate the same 
D)   offset this change by lowering the interest rates they pay on savings deposits

Question 4

Suppose the money supply increases.How is GDP affected?

Accepted Answer

A)   GDP increases because the resulting increase in the interest rate leads to a decrease in investment. 
B)   GDP increases because the resulting decrease in the interest rate leads to an increase in investment. 
C)   GDP decreases because the resulting increase in the interest rate leads to a decrease in investment. 
D)   GDP decreases because the resulting decrease in the interest rate leads to an increase in investment.

Question 5

What is the primary reason for people to own or hold money?

Accepted Answer

A)   because money has a guaranteed nominal return 
B)   because money has a guaranteed real return 
C)   because money can be used directly to buy goods and services 
D)   because money functions as a unit of account

Question 6

Suppose the Bank of Canada sells government securities to banks.Which of the following best describes how planned investment will be affected?

Accepted Answer

A)   Planned investment will increase. 
B)   Planned investment will decrease. 
C)   Planned investment will remain the same. 
D)   Planned investment will first increase, and then decrease.

Question 7

Suppose money demand increases and the Bank of Canada does NOT alter its monetary policy.What will be the effect on interest rates?

Accepted Answer

A)   Interest rates will increase. 
B)   Interest rates will decrease. 
C)   Interest rates will remain the same. 
D)   Interest rates will first increase, and then decrease.

Question 8

Which of the following is NOT a reason why the velocity of money increases?

Accepted Answer

A)   because funds are transmitted electronically 
B)   because the use of charge accounts is increasing 
C)   because the use of automatic teller machines is increasing 
D)   because the use of credit cards decreasing

Question 9

Which of the following is an example of a contractionary monetary policy?

Accepted Answer

A)   Transfer payments to poor families are reduced. 
B)   The Bank of Canada buys government securities in the open market. 
C)   The bank rate is raised. 
D)   Government spending is reduced.

Question 10

Which of the following has the most influence on the supply of money?

Accepted Answer

A)   interest rates 
B)   prices 
C)   the transactions demand for money 
D)   the Bank of Canada

Exam 15: Monetary Theory and Policy in an Open Economy

On which of the following does the Bank of Canada have the tightest grip?

Correct Answer
verified

Suppose money demand increases and the Bank of Canada does NOT alter its monetary policy.What will be the effect on interest rates?

Correct Answer
verified

What is the primary reason for people to own or hold money?

Correct Answer
verified

Suppose the Bank of Canada increases the overnight rate.What are chartered banks likely to do?

Correct Answer
verified

Suppose the Bank of Canada sells government securities to banks.Which of the following best describes how planned investment will be affected?

Correct Answer
verified

Suppose the quantity of money supplied exceeds the quantity of money demanded.Which of the following best describes how the interest rate is affected?

Correct Answer
verified

Which of the following is NOT a reason why the velocity of money increases?

Correct Answer
verified

Which of the following has the most influence on the supply of money?

Correct Answer
verified

Suppose the money supply increases.How is GDP affected?

Correct Answer
verified

Which of the following is an example of a contractionary monetary policy?

Correct Answer
verified

Exam 15: Monetary Theory and Policy in an Open Economy

On which of the following does the Bank of Canada have the tightest grip?

Correct AnswerverifiedShow Answer

Suppose money demand increases and the Bank of Canada does NOT alter its monetary policy.What will be the effect on interest rates?

Correct AnswerverifiedShow Answer

What is the primary reason for people to own or hold money?

Correct AnswerverifiedShow Answer

Suppose the Bank of Canada increases the overnight rate.What are chartered banks likely to do?

Correct AnswerverifiedShow Answer

Suppose the Bank of Canada sells government securities to banks.Which of the following best describes how planned investment will be affected?

Correct AnswerverifiedShow Answer

Suppose the quantity of money supplied exceeds the quantity of money demanded.Which of the following best describes how the interest rate is affected?

Correct AnswerverifiedShow Answer

Which of the following is NOT a reason why the velocity of money increases?

Correct AnswerverifiedShow Answer

Which of the following has the most influence on the supply of money?

Correct AnswerverifiedShow Answer

Suppose the money supply increases.How is GDP affected?

Correct AnswerverifiedShow Answer

Which of the following is an example of a contractionary monetary policy?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified