ECON 1010 Study Guide - Midterm Guide: Real Interest Rate, Money Creation, Potential OutputExam
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FACULTY OF LIBERAL ARTS AND PROFESSIONAL STUDIES – DEPARTMENT OF ECONOMICS
AP/ECON 1010.03 SECTION M
Introduction to Macroeconomics
TEST #2 – VERSION A
INSTRUCTOR: Tuesday, March 15th, 2016
Gordana Colby 1 HOUR (8:30AM – 9:30AM)
LOCATION: ACE 102
NAME: _________________________________ _________________________________
LAST NAME FIRST NAME
STUDENT NUMBER: _______________________________________
• Make sure to print your NAME, STUDENT NUMBER and SIGN the sheet above. Write your
name and student number at the top left of each page.
• Please fill in your answer to each question on the question paper in the space provided and
on the scantron sheet.
• You must use a pencil to fill in the scantron sheets.
• NO CALCULATORS are allowed.
• You have 1 hour to answer all questions. All questions are multiple choice format.
• For multiple choice answers, no work needs to be shown. The full marks will be granted if the
best answer is circled and zero otherwise.
• Good luck!
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MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
If Wolfgang transfers $1,000 out of his chequable deposit account and places it in his
non-chequable deposit account,
M1 rises and M2 remains the same.
M1 falls and M2 remains the same.
M1 and M2 fall.
M1 falls and M3 rises.
M1 falls and M2 rises.
Which one of the following is not a service of depository institutions?
lowering the cost of monitoring borrowers
lowering the cost of borrowing
providing a place for reserve account deposits
When the Bank of Canada makes an open market purchase, its assets ________ and its liabilities
decrease; do not change
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
The money creation process begins when
bank deposits increase.
desired reserves increase because of an increase in deposits.
banks have excess reserves.
banks lend reserves.
the quantity of money increases.
Everything else remaining the same, an increase in real GDP
decreases the demand for real money.
increases the demand for real money.
does not change the demand for real money.
increases the demand for real money up to a point, and then demand will automatically
decreases the demand for real money up to a point, and then demand will automatically
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