The Following Is a Simplified Consolidated Balance Sheet for the Chartered

question 26

Multiple Choice

The following is a simplified consolidated balance sheet for the chartered banking system and the Bank of Canada.Assume a desired reserve ratio of 5 percent for the chartered banks.All figures are in billions of dollars.CONSOLIDATED BALANCE SHEET: CHARTERED BANKING SYSTEM BALANCE SHEET: BANK OF CANADA
Refer to the above information, suppose the Bank of Canada sells $2 in securities directly to the chartered banks.As a result of this transaction, the supply of money:

• A)will directly increase by $2 and the money-creating potential of the chartered banking system will increase by $38.
• B)will directly decrease by $2 and the money-creating potential of the chartered banking system will decrease by $40.
• C)is not directly affected, but the money-creating potential of the chartered banking system will decrease by $40.
• D)will decrease by $2, but the money-creating potential of the chartered banking system will not be affected.

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Desire

A strong feeling of wanting or wishing for something to happen or be obtained.

Physiological Factors

Aspects related to the body's biological processes that can influence an individual's health, behavior, and reactions to various stimuli.

Psychological Factors

Elements of psychological influence that affect behavior, thinking, and emotional well-being, including attitudes, motivations, and mental health.

Hunger Drive

An internal state that prompts an organism to seek food and consume it to satisfy physiological needs for energy.