Econ 11.3 (X02) Assignment 3 (NO ANSWER).docVIP

Econ 114.3 (X02) Assignment 3 This assignment is based on the material in Modules 7, 8 and 9 of your COURSE GUIDE and Chapters 10, 11 and 12 of your textbook. Due date: March 4, 2016 Mark allocation: This assignment will count 10% toward your final grade 30 Multiple Choice (30 marks) Identify the choice that best completes the statement or answers the question. Table 10-3 The following information pertains to the Bank of Edmonton. Assets: Liabilities: Reserves $100 Deposits $1000 Loans $900 ____ 1. Refer to the Table 10-3. Assume that the Bank of Edmonton is holding the required percent of deposits as reserves. Also, assume all other banks hold only the required percent of deposits as reserves, and that people hold only deposits and no currency. What is the money multiplier? a. 1 b. 5 c. 10 d. 15 ____ 2. Refer to the Table 10-3. Assume that all other banks hold only the required 5 percent of deposits as reserves and people hold only deposits and no currency. If the Bank of Edmonton decides to hold exactly 5 percent in reserves, by how much would the economy’s money supply increase? a. $500 b. $1000 c. $1500 d. $2000 Table 10-4 The following information pertains to the Bank of Kingston. Assets: Liabilities: Reserves $12 000 Deposits $240 000 Loans $228 000 ____ 3. Refer to the Table 10-4. If the Bank of Canada requires a reserve ratio of 4 percent, how much in excess reserves does the Bank of Kingston now hold? a. $1200 b. $2400 c. $2880 d. $3000 ____ 4. Suppose a bank uses $100 of its $500 excess reserves to make a new loan when the reserve ratio is 20 percent. How does this action by itself initially change the money supply? a. The money supply increases by $80. b. The money supply decreases by $80. c. The money supply increases by $100. d. The money supply decreases by $100. ____ 5. Which of the following lists ranks the Bank of Canada’s monetary policy tools from most to least frequently used? a. bank rate changes; open-market