Your Local Newspaper Has a Story in Its Business Section

question 8

Multiple Choice

Your local newspaper has a story in its business section that reports that government spending will again exceed tax revenues.This means that the:

• A)national debt will increase.
• B)balance of payments will experience yet another deficit.
• C)rate of inflation is likely to fall.
• D)monetary policies pursued by the Bank of Canada have been too loose.

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Definitions:

Reserve Requirement

A regulation set by central banks requiring commercial banks to hold a certain amount of their deposits as reserves, either as cash in their vaults or as deposits with the central bank, to ensure liquidity.

Money Multiplier

The ratio of the increase in total money supply generated from an initial deposit in a banking system.

Compliance

The act of conforming to or following rules, regulations, standards, or laws.

Reserves

Funds or assets set aside to meet future liabilities, unexpected costs, or potential financial obligations.