In the Simple Deposit Expansion Model, a Decline in Chequable

question 114

Multiple Choice

In the simple deposit expansion model, a decline in chequable deposits of $1000 when the desired reserve ratio is equal to 10 percent implies that the Bank of Canada ________.

• A) sold $1000 in government bonds
• B) sold $100 in government bonds
• C) purchased $1000 in government bonds
• D) purchased $100 in government bonds

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Definitions:

Real Interest Rate

The interest rate adjusted for inflation, reflecting the true cost of borrowing or real yield on an investment.

Nominal Wages

The amount of money paid to workers before adjusting for inflation, reflecting the face value of earnings irrespective of purchasing power.

Annual Rate

A percentage that represents the growth, yield, or return of an investment or account over a one-year period.

Real Wages

The purchasing power of wages, quantifying the amount of goods and services that can be bought, accounting for inflation.