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Econ 1022 Ch 24-27 Review

9 Pages
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Department
Economics
Course Code
Economics 1022A/B
Professor
Bruce Hammond

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ECONOMICS 1022A             NOVEMBER 2010  PRACTICE QUESTIONS:    CHAPTER 24:    1) Which of the following best fits the definition of money? A) Gold. B) Any commodity or token that is generally acceptable as a means of payment. C) An obligation between the parties to a transaction. D) Any unit of account. E) Any medium of exchange.   2) Consider the following data from the economy of Adanac: · Currency outside banks: $15 billion · Personal and non-personal chequable deposits: $40 billion · Personal non-chequable deposits: $50 billion · Non-personal non-chequable deposits: $125 billion · Fixed term deposits: $200 billion What is the value of M1 and the value of M2 in this economy in billions of dollars? A) 105; 230. B) 110; 235. C) 55; 430. D) 55; 230. E) 60; 430.   3) The Bank of Canada does not do which of the following? A) Supervise chartered banks. B) Lend money to the public. C) Act as a lender of last resort to banks. D) Issue bank notes. E) Hold government of Canada securities. 4) Suppose that a country has $50 billion in bank reserves, $100 billion in currency held by the public, and $500 billion in bank deposits. The currency drain ratio is A) 18%. B) 50%. C) 30%. D) 10%. E) 20%.   5) If households and firms find they are holding more money than desired, they will A) sell bonds, and the interest rate will rise. B) sell bonds, and the interest rate will fall. C) buy bonds, and the interest rate will rise. D) buy bonds, and the interest rate will fall. E) buy goods, and the price level will rise. 6) Real GDP is $2,000 billion, the price level is 120. Nominal GDP is A) $24 billion. B) $600 billion. C) $2,000 billion. D) $2,400 billion. E) $166.67 billion. 7) Suppose that the banking system has excess reserves of $10 million, the desired reserve ratio is 10 percent and the currency drain ratio is 40 percent. By how much will the quantity of money increase? A) $12.5 million. B) $28 million. C) $50 million. D) $40 million. E) $22 million. CHAPTER 25: Refer to the table below to answer the following questions. Table 1 Currency 2009 Exchange Rate 2010 Exchange Rate EU euro 2 euros/dollar 3 euros/dollar Japanese yen 120 yen/dollar 90 yen/dollar 8) Refer to Table 1. Between 2009 and 2010, the Canadian dollar ________ versus the euro and ________ versus the yen. A) appreciated; depreciated B) appreciated; appreciated C) depreciated; depreciated D) depreciated; appreciated E) not changed; not changed 9) Which of the following factors influence the demand for Canadian dollars? A) The exchange rate and the world demand for Canadian exports. B) Interest rates in Canada and other countries, and the expected future exchange rate. C) The world demand for Canadian exports and Canadian demand for imports. D) Both A and B. E) Both B and C. 10) Suppose interest rates are 3 percent in Japan and 6 percent in Canada. The current value of the exchange rate is 110 Japanese yen per dollar, and it is generally expected that in one year the exchange rate will be 106.7 yen per dollar. However, new information is released that changes everyone's expectations, and they think the exchange rate in one year will still be 110 yen per dollar. As a result of this change, A) the demand for Canadian dollars increases. B) the supply of Canadian dollars decreases. C) people will borrow in Canada and lend in Japan. D) the demand for Canadian dollars decreases. E) A and B. 11) Suppose you think that the exchange rate will depreciate over the next month. What should you do now in anticipation of profit? A) Buy Canadian dollars. B) Buy U.S. dollars. C) Sell Canadian dollars. D) Sell U.S. dollars. E) Do both B and C. Fact 1 You are given the following information about the country of Ecoland, whose currency is the turkey, and whose official settlements balance is zero. 12) Refer to Fact 1. What is the net exports? A) -2 billion turkies B) -1 billion turkies C) 3 billion turkies D) -3 billion turkies E) 1 billion turkies Use the table below to answer the following questions. Table 2 13) Refer to Table 2. If Mengia's official settlement balance was in balance every year, for which year or years can you say for sure there was a current account surplus? A) year 4 only B) year 2 only C) years 2 and 3 D) years 1 and 2 E) years 3 and 4 CHAPTER 26: 14) An increase in oil prices to a country that is a net importer of oil shifts A) both the short-run aggregate supply and long-run aggregate supply curves
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