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ECON-1012-B-Introduction to Macroeconomics

ECON-1012-B-Introduction to Macroeconomics

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Real interest rate (percent per year)	Loanable funds demanded (trillions of 2012 dollars)	Loanable funds supplied (trillions of 2012 dollars)
4	6.5	4.5
5	6.0	5.0
6	5.5	5.5
7	5.0	6.0
8	4.5	6.5
9	4.0	7.0
10	3.5	7.5

Refer to Table 7.2.1, which gives data about a loanable funds market. What is the equilibrium quantity of saving?

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What is the Ricardo-Barro effect?

A government budget deficit has no effect on the real interest rate.

A government budget deficit induces a decrease in saving that magnifies the crowding-out effect.

A government budget deficit increases the real interest rate.

A government budget deficit crowds out private investment.

A government balanced budget has no effect on real GDP.

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Which of the following statements is the crowding-out effect?

Government spending crowding out private spending.

Private saving crowding out net taxes.

A government deficit crowding out investment.

Private saving crowding out government saving.

Private investment crowding out government saving.

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When the Bank of Canada conducts an open market purchase, which of the following events occurs?

The monetary base decreases.

The monetary base increases.

Interest rates rise.

Bank reserves decrease.

The quantity of Bank of Canada notes increases.

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What is the opportunity cost of holding currency?

the price level

the inflation rate

the nominal interest rate

the real interest rate

consumption given up

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When the Bank of Canada conducts an open market operation to create money, which of the following situations will bring the money creation process to an end?

When the money multiplier is maximized.

When people are holding the amount of currency they desire.

When excess reserves have been eliminated.

When the Bank of Canada is holding the quantity of securities that it desires.

When the desired reserve ratio equals 1.

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For you to be able to find someone to swap what you have for what you want, which of the following situations must exist?

A double system of money exists.

Specialization won't work in the society in which you live.

A monetary exchange system exists.

A double coincidence of wants exists.

Money is necessary for the exchange to work.

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Which of the following items are included in a bank's reserves?

its common stock holdings, the cash in its cash machines and its deposit at the Bank of Canada

the cash in its vault plus its deposit at the Bank of Canada

the cash in its vault plus its deposits held at the Bank of Canada plus the government bonds that it holds.

the cash in its vault plus any gold held for the bank at the Bank of Canada

the cash in its cash machines plus the value of its customers' chequable deposits

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Which of the following is not considered money in Canada today?

deposits at banks

Bank of Canada notes

deposits at credit unions

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Short Description: A line graph of interest rate versus real money. Long Description: The vertical axis is labelled, interest rate (percent per year) and the horizontal axis is labelled, real money (billions of 20 12 dollars). The line for M D2 slopes downward from the upper left corner to the lower right corner passing through the points B, A, and C from top to bottom. The line for M D1 slopes downward from the upper left corner to the lower right corner, parallel to the line for M D2 on the right and passing through the point E. The line for M D3 slopes downward from the upper left corner to the lower right corner, parallel to the line for M D2 on the left and passing through the point F. The points F, A, and E are at the same vertical height.

Refer to Figure 8.5.1, which shows possible outcomes in the money market. Which of the following changes shows the effect of a rise in the market price of bonds?

a movement from A to F

a movement from A to E

a movement from A to C

a movement from C to A

a movement from A to B

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