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Economics - Canada

FOR BEGINNERS

Multiple Choice— Select the option that best completes the sentence or provides the answer to the question.

The basic functions of the Bank of Canada include
Acting as banker for the chartered banks.
Regulating the stock market & acting as a broker for large private firms.
Providing deposit insurance for Canadian dollar deposits.
All of the above


The basic functions of the Bank of Canada include
regulating the money supply & supporting the financial markets.
acting as banker for the chartered banks.
acting as lender of last resort.
all of the above


The basic functions of the Bank of Canada include
regulating the stock market.
acting as a lender of last resort to the commercial banks.
acting as a lender of last resort to the large primary manufacturing firms.
providing deposit insurance for Canadian dollar deposits.


The Canada Deposit Insurance Corporation (CDIC) was set up to protect
member financial institutions in case of non-payment of loans from borrowers.
depositors with Canadian dollar accounts in any Canadian financial institution for up to a maximum of $100 000 per institution.
depositors with Canadian dollar accounts in member institutions for up to a maximum of $60 000 per bank.
member financial institutions in case of non payment of loans from the government.



The Bank of Canada purchases $5 million worth of government securities from an investment dealer with a cheque drawn on the Bank of Canada.

The dealer deposits this cheque at a Canadian Chartered Bank. The desired reserve ratio of all banks is 25 percent.

Assume all chartered banks are operating with no excess reserves and there is no cash drain. The Chartered Bank is immediately in a position to expand its loans by

$5 million.
$15 million.
$3.75 million.
$1.25 million.


Which one of the following transactions would appear as a debit in the current account of the Canadian balance of payments?
Canadian tourists in France purchase French francs.
Canadians receive dividends on U.S. investment in Latin America.
A Canadian subsidiary exports raw materials to its Dutch parent company.
The Bank of Canada purchases German marks to hold in its official reserves.


The purchase of government securities by the Bank of Canada is predicted to
increase loans made by the banks.
decrease bank reserves.
increase the government deficit.
be an effective anti-inflationary policy.


In an open economy like Canada, a decrease in the money supply leads to
an increase in the external value of the dollar, thereby stimulating net exports and raising aggregate demand.
a reduction in the external value of the dollar, thereby stimulating net exports and raising aggregate demand.
a reduction in the external value of the dollar, thereby inhibiting net exports and raising aggregate demand.
an increase in the external value of the dollar, thereby inhibiting net exports and reducing aggregate demand.


In an open economy like Canada, an increase in the money supply leads to
an increase in the external value of the dollar, thereby stimulating net exports and raising aggregate demand.
an increase in the external value of the dollar, thereby inhibiting net exports and raising aggregate demand.
a reduction in the external value of the dollar, thereby stimulating net exports and raising aggregate demand.
an increase in the external value of the dollar, thereby stimulating net exports and reducing aggregate demand.


Suppose the Bank of Canada purchased $5 million worth of government securities in the open market. The desired reserve ratio of the chartered banks is 25 percent and the public's desire to hold cash is 5 percent of their total deposits. The money supply would
decrease by $16.67 million.
increase by $20 million.
increase by $16.67 million.
decrease by $ 8.33 million.