Chapter 26.4

Question 1

The money supply in Canada is measured using M1, M2, M2+, and M3. The reason there are so many measures of the money supply is that
A) the Bank of Canada wants to confuse the general public.
B) different kinds of bank accounts represent different functions of money, and so the various measures are used to reflect these different functions.
C) the money supply is too large to have only one measurement.
D) only the newer and broader measurements are correct but the older measurements are still used so that historical comparisons are possible.
E) it is a convenient way for provincial and federal governments to hide their budgetary surpluses.

Answer 1

B

Question 2

Until recently, and for many years, the common definition of the money supply used by the Bank of Canada was M1, which included currency in circulation plus
A) chequable deposits at the chartered banks.
B) chequable deposits and savings accounts at the chartered banks.
C) savings accounts and demand loans.
D) term deposits and money market funds.
E) chequable deposits at all financial institutions.

Answer 2

A

Question 3

As a measure of the Canadian money supply, M2+ is defined as currency in circulation plus
A) all chequable deposits.
B) demand and notice deposits at all financial institutions.
C) savings deposits at the chartered banks and non-bank financial institutions.
D) term deposits and money market funds at all financial institutions.
E) term deposits, money market funds and personal savings accounts.

Answer 3

B

Question 4

The main distinction between M2 and M2+ is that M2+ also includes
A) deposits at trust companies, caisse populaires and foreign-currency accounts.
B) coins in circulation.
C) money market mutual funds held by the Bank of Canada.
D) paper currency.
E) deposits at financial institutions other than the chartered banks.

Answer 4

E

Question 5

The concept of “near money” refers to
A) money substitutes such as credit cards.
B) cheques on demand deposits.
C) financial assets whose capital values are too unstable for them to be classified as money.
D) assets that fulfill the temporary store-of-value function but not the medium-of-exchange function.
E) assets that fulfill the medium-of-exchange function but not the store of value function.

Answer 5

D

Question 6

Credit cards are considered to be “money substitutes” instead of money because
A) they are not acceptable to pay for purchases.
B) they cannot serve as a temporary medium of exchange.
C) the only function of money they can perform is to serve as a store of value.
D) money must eventually be used to pay for the transaction.
E) credit card accounts are not chequable.

Answer 6

D

Question 7

Which of the following is an example of "near money"?
A) Scotiabank credit card
B) American Express card
C) 30-day Treasury bill
D) mortgage on a house
E) car loan

Answer 7

C

Question 8

When you pay for your $74 purchase at the grocery store with a debit card, you are
A) transferring $74 of currency from your bank account to the grocery store’s bank account.
B) withdrawing $74 from your bank account with which you pay for your groceries.
C) transferring your claim on $74 worth of gold to the grocery store.
D) electronically transferring $74 of deposit money from your bank account to the grocery store’s bank account.
E) essentially promising the grocery store that your bank will pay them $74 at the end of the month when debts are settled.

Answer 8

D

Question 9

The M2 and M2+ definitions of the money supply concentrate on the \_\_\_\_\_\_\_\_ function of money.
A) store of value
B) unit of account
C) medium-of-exchange
D) accounting
E) deposit-creation

Answer 9

C

Question 10

The M2++ and M3 definitions of the money supply include financial assets
A) that serve the store-of-value function and are convertible into a medium of exchange.
B) such as deposits at credit unions and caisses populaires.
C) such as deposits at non-bank financial institutions.
D) such as a credit card.
E) such as a government Treasury bill.

Answer 10

A

Question 11

Developments in the financial industry in recent years have resulted in a multitude of types of deposits. For the purposes of studying the money supply, the most important distinction is between chequing and savings deposits which are ________ and term deposits and other financial assets which are ________.
A) a store of value; not a store a value
B) a unit of account; not a unit of account
C) a component of the money supply; not a component of the money supply
D) media of exchange; not media of exchange
E) money substitutes; near money

Answer 11

D