Chapter 14 Money, Banking, and Money Creation QUESTIONS WITH CORRECT ANSWERS|ALL YOU NEED FOR YOUR REVISION

Chapter 14 - Money, Banking, and Money Creation

Chapter 14
Money, Banking, and Money Creation




True / False Questions


1. Currency and coins held by banks are part of the M1 definition of money supply.
FALSE



Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 14-03 Describe what backs Canada's money supply; making us willing to accept it as payment.
Topic: 14-03 Money Definition M1+



2. If a coin is token money, its face value is greater than its intrinsic value.
TRUE



Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 14-03 Describe what backs Canada's money supply; making us willing to accept it as payment.
Topic: 14-03 Money Definition M1+



3. The basic source of money in our economy is the Department of Finance.
FALSE



Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 14-03 Describe what backs Canada's money supply; making us willing to accept it as payment.
Topic: 14-06 Institutions That Offer Demand Deposits




14-1

,Chapter 14 - Money, Banking, and Money Creation
4. Chartered banks are the major source of money creating in the Canadian economy.
TRUE



Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 14-03 Describe what backs Canada's money supply; making us willing to accept it as payment.
Topic: 14-06 Institutions That Offer Demand Deposits




14-2

,Chapter 14 - Money, Banking, and Money Creation



5. One of the three basic functions of money is to serve as legal tender.
FALSE



Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 14-01 Identify and explain the functions of money.
Topic: 14-01 The Functions of Money



6. The currency owned by chartered banks is included in the money supply.
FALSE



Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 14-02 List and describe the components of the supply of money in Canada.
Topic: 14-02 The Components of the Money Supply



7. Fiat money refers to "near-monies."
FALSE



Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 14-03 Describe what backs Canada's money supply; making us willing to accept it as payment.
Topic: 14-08 Money Definition M2



8. The value of money varies inversely with the price level.
TRUE



Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 14-03 Describe what backs Canada's money supply; making us willing to accept it as payment.
Topic: 14-08 Money Definition M2




14-3

, Chapter 14 - Money, Banking, and Money Creation



9. Money and banking in Canada are federal responsibilities.
TRUE



Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 14-02 List and describe the components of the supply of money in Canada.
Topic: 14-17 The Canadian Financial System



10. Mortgage-backed securities are bonds backed by mortgage payments.
TRUE



Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 14-05 Identify and explain the main factors that contributed to the U.S. financial crisis of 2007-2008.
Topic: 14-16 Stabilizing the Purchasing Power of Money



11. Securitization is the process of slicing up and bundling groups of loans, mortgages,
corporate bonds and other financial debts into distinct new securities.
TRUE



Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 14-05 Identify and explain the main factors that contributed to the U.S. financial crisis of 2007-2008.
Topic: 14-17 The Canadian Financial System



12. Chartered bank reserves are an asset to chartered banks but a liability to the Bank of
Canada holding them.
TRUE



Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 14-06 Discuss why the Canadian banking system is called a fractional reserve system.
Topic: 14-11 Money as Debt




14-4