Refer to the Above Information

question 32

Multiple Choice

Refer to the above information.If the desired reserve ratio falls from 25 percent to 10 percent, excess reserves of this single bank will:

• A)rise by $6,000 and the monetary multiplier will increase from 4 to 10.
• B)rise by $60,000 and the monetary multiplier will increase from 4 to 10.
• C)fall by $6,000 and the monetary multiplier will decline from 30 to 10.
• D)fall by $2,000 and the monetary multiplier will decline from 10 to 4.

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Definitions:

CCA

Capital Cost Allowance; a tax deduction in Canada for the depreciation of tangible property.

Earnings Before Interest And Taxes

A measure of a firm's profit that includes all income and expenses except interest and income tax expenses.

Retained Earnings

The portion of a company's profits that is kept or retained rather than distributed to shareholders or owners as dividends.

Net New Equity

The amount of equity capital a company raises through the issuance of new shares minus any shares it has bought back, reflecting the net increase in share capital.