1. Which of the following are found on the asset side of the Bank of Canada's balance sheet?
2. Government securities
3. Government deposits
4. Currency in circulation
5. Only (a) and (c) of the above

2. Which of the following are found on the liability side of the Bank of Canada's balance sheet?

a. Advances to banks

b. Reserves

c. Currency in Circulation

d. Both (b) and (c) of the above

3. When the Bank of Canada engages in open market purchase, it --------- securities that the other party agrees to ------.

1. Buys; buy
2. Buys; sell
3. Sells; buy
4. Sells; sell

4. Which of the following transmission mechanisms describes the "wealth effect" channel the best?

1. M increase P^eincrease^eincrease i_rdecrease I increase Y increase
2. M increase P_eincrease W increase C decrease Y increase
3. M increase i_rdecrease currencydecrease E decrease NX increase Y increase
4. None of the above

5. Taylor Rule states that:

1. The monetary authorities should raise nominal interest rates by more than the increase in the inflation rate.
2. The monetary authorities should raise real interest rates by more than the increase in the inflation rate.
3. The monetary authorities should decrease nominal interest rates by more than the decrease in the inflation rate.
4. Both a. and c. of the above

6. Select the correct statement regarding Canadian Schedule I and II banks:

1. Schedule I banks must be widely held; schedule II banks can have more than 10% shareholders
2. Any widely held and regulated Canadian financial institution (other than a bank) can own 100% of both schedule I and II banks.
3. Widely held foreign banks can own 100% of a Canadian bank subsidiary
4. Only (a) and (c) are correct

7. Monetary authorities implement contractionary monetary policy and use monetary instruments in the following way:

1. Economy overgrowing - increase money supply, decrease interest rates.
2. Economy underperforming - increase money supply, decrease interest rates
3. Economy overgrowing - decrease money supply, increase interest rates
4. Economy underperforming - decrease money supply, increase interest rates

8. All but ----------- are general principles of bank management:

1. Commodity management
2. Liability management
3. Liquidity management
4. Asset management

9. For foreign holders of US assets, the real return (RET) is higher if the US

a. The US dollar appreciates against the foreign currency

b. RET on US asset held by a foreigner is equal to the sum of nominal RET on asset and appreciation of the US dollar

c. RET on US asset held by a foreigner is equal to the difference of nominal RET on asset and appreciation of the foreign currency

d. All of the above.

10. One of the reasons banks hold lower capital asset ratio is:

1. Lower capital asset ratio increases return on equities
2. Lower capital asset ratio increases return on assets
3. Lower capital asset ratio solves bankruptcy issues
4. All of the above

11. Near Banks in Canada are financial institutions:

1. That are built near major banks
2. That are always covered by CDIC
3. That do not accept deposits but do extend loans
4. That have limited banking functions

12. In the Income Gap analysis it is correct to assume that

1. If RSA > RSL, rise in interest rates will increase bank interest income
2. If RSA > RSL, rise in interest rates will decrease bank interest income
3. If RSA < RSL, rise in interest rates will increase bank interest income
4. None of the above

13. The price of one Canadian dollar is 0.8642 US dollars, and the price of one Euro is 1.1979 US dollars. The price of Euro in terms of Canadian dollar is:

1. 0.7214
2. 1.3861
3. There is not sufficient information to calculate this value
4. Both a and b are correct values

14. If Americans lose their taste for Mexican made goods, we should observe the following change(s) in the dollar-peso market:

1. The supply curve of dollars shifts right
2. The demand curve for dollars shifts left
3. The supply curve of dollars shifts left
4. The demand curve for dollars shifts right

15. An expected depreciation of the dollar, everything else held constant, should cause:

a. The supply of dollars to decrease

b. The demand for dollars to increase

c. The demand for dollars to decrease

d. The dollar to appreciate now relative to other currencies

16. Bank can lower bank's capital by:

a. Issuing more stocks

b. Reducing dividends to shareholders

c. Issue fewer loans or sell securities and use proceeds to reduce liabilities

d. Acquire new funds and increase assets