If the Bank of Canada Increases the Interest Rate Paid

question 40

Multiple Choice

If the Bank of Canada increases the interest rate paid on reserves, banks will tend to hold _____ excess reserves, which will _____ the money multiplier.

• A)more; increase
• B)more; decrease
• C)fewer; increase
• D)fewer; decrease

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Definitions:

Standard Deviation

Standard deviation is a statistical measure of the dispersion or variability within a data set, indicating how much individual data points deviate from the mean.

Normal Distribution

A bell-shaped frequency distribution curve that is symmetric about the mean, showing that data near the mean are more frequent in occurrence.

Exponential Distribution

The exponential distribution is a continuous probability distribution used to model the time or space between events in a Poisson process.

Density Function

A mathematical function that specifies the probability of a random variable taking on certain values.