If the reserve ratio is 5 percent, then the money multiplier for the banking system will be:

Multiple Choice

• 5
• 1/5
• 1/20
• 20
• 1/.5

Open market operations change:

Multiple Choice

• bank reserves, but not the size of the money multiplier
• the target overnight rate but not the interest rate on bonds
• the size of the money multiplier, but not bank reserves
• neither bank reserves nor the size of the money multiplier
• both bank reserves and the size of the money multiplier

Which of the following correctly states the four basic functions that the Bank of Canada must perform as part of its mandate?

Multiple Choice

• managing the money supply; acting as "the bankers' bank"; acting as fiscal agent to provincial and municipal governments; ensuring the stable operation of fiscal policy
• managing the entire money market; acting as "the bankers' fiscal agent"; acting as a financial advisor to the federal government; ensuring the stable operation of financial markets
• managing the entire money market; acting as "the bankers' fiscal agent"; acting as a fiscal agent to all levels of government; developing the strategic policy of all commercial banks
• managing the money supply; acting as "the bankers' bank"; acting as the federal government's fiscal agent; ensuring the stable operation of financial markets
• increasing the money supply; acting as "the bankers' bank"; acting as the federal government's fiscal agent; developing the strategic policy of all commercial banks

If there were an inflationary gap, the proper government policies would involve a government:

Multiple Choice

• surplus, the purchase of bonds in the open market, and a lower target overnight rate
• deficit, the sale of bonds in the open market, and a higher target overnight rate
• balanced budget and lower target overnight rate
• deficit, the purchase of bonds in the open market, and a higher target overnight rate
• surplus, the sale of bonds in the open market, and a higher target overnight rate

When the Bank of Canada sells a bond to a member of the public:

Multiple Choice

• the money supply is reduced
• the money multiplier falls
• the lending ability of the banking system is increased
• bank reserves stay the same
• the money multiplier is not relevant