Quiz Questions

Chapter 13. Money and Banking

Which one is an economic function of money?

A.	a medium of communications

B.	a factor of production

C.	a store of bonds

D.	a unit of account

The largest component of M1 is

coins

currency

C.	personal savings deposits and nonpersonal notice deposits

D.	demand deposits

Which of the following constitutes the largest element in the M2 money supply?

currency

coins

C.	personal savings deposits and nonpersonal notice deposits

D.	demand deposits

Chequing deposits are money because they are

A.	legal tender

B.	fiat money

C.	token money

D.	a medium of exchange

The supply of money M1 consists almost entirely of the debts of

A.	the federal government

B.	the Bank of Canada

C.	depository institutions

D.	the Bank of Canada and depository institutions

Use the following table to answer about the money supply, given the following hypothetical data for the economy.

R-1 13a

The size of the M1 money supply is

A. $45 billion

B. $75 billion

C. $235 billion

D. $275 billion

Use the following table to answer about the money supply, given the following hypothetical data for the economy.

R-1 13a

The size of the M2 money supply is

A. $235 billion

B. $275 billion

C. $366 billion

D. $406 billion

Use the following table to answer about the money supply, given the following hypothetical data for the economy.

R-1 13a

The size of the M2+ money supply is

A. $366 billion

B. $406 billion

C. $489 billion

D. $529 billion

Which of the following best describes the backing of money in Canada?

A.	the gold stored at the Bank of Canada

B.	the belief of holders of money that it can be exchanged for desirable goods and services

C.	the willingness of banks and the government to surrender something of value in exchange for money

D.	the faith and confidence of the public in the ability of government to pay its debts

10.

If the price level increases 20%, the value of money decreases

14.14%

16.67%

20%

25%

11.

To keep the value of money fairly constant, the Bank of Canada

A.	uses price and wage controls

B.	employs fiscal policy

C.	controls the money supply

D.	buys stock

12.

Which of the following best expresses how the use of money benefits our society?

A.	money is intrinsically valuable

B.	money creates wealth by generating interest income

C.	money creates wealth by facilitating specialization

D.	the larger the money supply the larger the economy's output

13.

Which of the following statements is true?

A.	Canadian currency is backed by gold

B.	Canadian currency is backed by U.S. dollars

C.	Canadian currency is backed by gold and U.S. dollars

D.	Canadian currency is backed by the public's belief and confidence

14.

Credit cards

A.	are a form of money

B.	allow people to economize on their holdings of money

C.	cause people to need to hold more money

D.	have no affect on people's money holdings

15.

Serious inflation harms money's ability to serve as a

A.	store of value

B.	unit of account

C.	medium of exchange

D.	all of the above

16.

In Canada, firms that operate as "banks" require a charter from

A.	the Bank of Canada

B.	the federal government

C.	a provincial government

D.	the provincial government in every province in which they operate

17.

Which of the following is an example of a financial intermediary?

A.	a medium of exchange

B.	a credit card

C.	a short-term loan

D.	a credit union

18.

What are the main liabilities of Canadian chartered banks?

A.	deposits of their customers

B.	loans to their customers

C.	wages to their employees

D.	debts to the Bank of Canada

19.

What are the main assets of Canadian chartered banks?

A.	their buildings

B.	loans to their customers

computers

D.	cash reserves

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