Suppose the Bank of Canada Chooses to Expand the M2

question 103

Multiple Choice

Suppose the Bank of Canada chooses to expand the M2 measure of money supply by exactly $10 million.The Bank could implement this expansion by

• A)buying $10 million worth of government securities on the open market.
• B)selling $10 million worth of government securities on the open market.
• C)increasing reserves at the commercial banks by $10 million.
• D)decreasing reserves at the commercial banks by $10 million.
• E)None of the above would lead to an increase of M2 by $10 million.

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Definitions:

Social Exchange Theory

A framework suggesting that social behavior is the result of an exchange process aimed at maximizing benefits and minimizing costs to oneself.

Rewards and Costs

In social exchange theory, the benefits gained and the burdens or obligations faced in interpersonal relationships.

Social Exchange Theory

A theoretical framework that suggests social behavior is a result of an exchange process to maximize benefits and minimize costs.

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