The Bank of Canada purchases $5 million worth of government securities from an investment dealer with...
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• 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 Bank XYZ, a commercial bank. • The target reserve ratio for all banks is 20 percent. • All commercial banks operate with no excess reserves. • There is no cash drain. Suppose, in addition, that the public decides to hold 5 percent of their deposits in cash. As a result of the new deposit, the money supply would eventually A. decrease by $12.00 million. B. decrease by $32.00 million. C. increase by $36.00 million. D. increase by $20.00 million. E. not change. • 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 Bank XYZ, a commercial bank. • The target reserve ratio for all banks is 20 percent. • All commercial banks operate with no excess reserves. • There is no cash drain. Suppose, in addition, that the public decides to hold 5 percent of their deposits in cash. As a result of the new deposit, the money supply would eventually A. decrease by $12.00 million. B. decrease by $32.00 million. C. increase by $36.00 million. D. increase by $20.00 million. E. not change.
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Macroeconomics
ISBN: 978-1464168505
5th Canadian Edition
Authors: N. Gregory Mankiw, William M. Scarth
Posted Date:
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