In the Simple Deposit Expansion Model, a Decline in Chequable

question 30

Multiple Choice

In the simple deposit expansion model, a decline in chequable deposits of $1000 when the desired reserve ratio is equal to 20 percent implies that the Bank of Canada ________.

• A) sold $200 in government bonds
• B) sold $500 in government bonds
• C) purchased $200 in government bonds
• D) purchased $500 in government bonds

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Definitions:

Market Economy

A market economy is an economic system in which supply and demand from consumers drive the production of goods and services.

Cash Crops

Cash crops are agricultural products grown primarily for sale to others rather than for personal use by the farmer or grower.

Urban Areas

Densely populated regions characterized by high human settlement and infrastructural development, often contrasted with rural areas.

Boom-And-Bust Economic Cycles

Describes fluctuations in an economy where a period of rapid economic growth is followed by a period of sharp decline.