In Practice,it Is Not Possible for the Bank of Canada

question 21

Multiple Choice

In practice,it is not possible for the Bank of Canada to control the money supply because

• A)the resulting effects on the value of the Canadian dollar are difficult to predict.
• B)it cannot control the process of deposit creation carried out by the commercial banks.
• C)it cannot control the amount of cash reserves that are injected into or withdrawn from the banking system.
• D)it does not have the legal power to do so.
• E)None of the above-the Bank of Canada could control the money supply if it chose to do so.

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Definitions:

Equity Multiplier

A ratio of financial leverage showing the portion of a company's assets financed through shareholders' equity.

Statement Of Financial Position

Financial statement showing a firm’s accounting value on a particular date. Also known as a balance sheet.

Statement Of Comprehensive Income

Financial statement summarizing a firm’s performance over a period of time. Formerly called an income statement.

Quick Ratio

A liquidity metric that measures a company's ability to cover its short-term obligations with its most liquid assets, excluding inventory.