Chapter 26 - Money and Banking Flashcards
Which of the following best describes near money? A) 30-day Treasury bill B) Primabank credit card. C) car loan D) mortgage on a house E) American Express card.
A
Fiat money A) is different from paper money. B) is backed by gold. C) is not used as a unit of account. D) has no intrinsic value. E) is not legal tender.
D
Which of the following is a function of money? (Select the three that apply) A) near money. B) store of value C) double coincidence of wants D) medium of exchange E) unit of account
B,D,E
Suppose children at a summer camp are each given a credit of $20 at the snack shop where purchases are recorded but no cash is exchanged. This is an example of money as a(n) (Select the two that apply) A) store of value B) medium of exchange C) near money D) double coincidence of wants E) unit of account
A,E
Paper money and coins that are not convertible into anything with intrinsic value, but are declared by the government to be legal tender, are known as ________.
fiat;
The Bank of Canada has three main functions in the Canadian economy. Which of the following is not a function of the Bank of Canada? A) regulator of the money supply. B) banker of commercial banks C) banker of the federal government D) maintaining profiles of depositors
D
Canada has a _______ - reserve banking system, in which commercial banks keep only a fraction of their total deposits in reserves. A commercial bank has a _____ ratio that governs what it attempts to keep as reserves.
fractional;reserve
If all the commercial banks in the banking system collectively have $340 million in cash reserves and are satisfying their target reserve ratio of 16 percent, what is the amount of deposits they have? A) $340 million B) $54 million C)$2625 million D) $0 E) $2125 million
E
Suppose you found a $5 bill that was lost for several years under your grandmother's mattress and you decided to deposit this money in a commercial bank. If the target reserve ratio were 25 percent and all excess reserves were lent out, your new deposit of $5 would lead to an eventual expansion of the money supply of A) $16 B) $20 C) $14 D) $30 E) $8
B
The practice of debasement by the ruling authorities resulted in A) inflation B) the practice of clipping C) a decrease in the price level. D) a net increase in the tax rate E) an increase in the interest rate.
A
Gresham’s law states that when two types of money are used side by side, the one with ________ will be driven out of circulation. The insights of this law are likely to be observed in a _________ economy.
A) less intrinsic value; high-inflation
B) greater intrinsic value; low-inflation
C) less intrinsic value; low-inflation
D) greater intrinsic value, high-inflation
D
In Canada, commercial banks A) have a positive reserve ratio. B) never have excess reserves. C) are required by the Bank Act to hold required reserves. D) have a reserve ratio of zero. E) have a reserve ratio of 100%
A
Following a new deposit, the ______ the more money will be created by the banking system.
A) smaller the target reserve ratio.
B) larger the share of the owner’s capital in banks’ liabilities.
C) smaller the value of loans on the balance sheet.
D) larger the cash drain
A
After the invention of coinage, authorities had to approve the face value of the coins. However, coins often could not be taken at their face value due to the common practice of A) minting B) stealing C) milling D) clipping E) inflation
D
Suppose the Canadian banking system jointly has $30 million in reserves (cash and deposits at the Bank of Canada), all banks have a target reserve ratio of 15 percent, and there are no excess reserves. What is the amount of deposits in the banking system? A.$100 million B.$160 million C.$400 million D.$5 million E.$200 million
E
