Assume That the Currency-Deposit Ratio Is 0

question 62

Multiple Choice

Assume that the currency-deposit ratio is 0.5 and the reserve-deposit ratio is 0.2.The Bank of Canada carries out open-market operations,purchasing $1,000,000 worth of bonds from banks.This action will increase the money supply by

• A)$1,428,571.
• B)$1,714,285.
• C)$2,142,857.
• D)$2,400,000.

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Definitions:

Tax Burden

The total amount of taxes paid by an individual, corporation, or sector, often expressed as a percentage of income or GDP.

Price Paid

The amount of money exchanged for a good or service.

Consumers

Individuals or groups that purchase goods and services for personal use.

Excise Tax

A specific tax levied on the sale or consumption of particular goods, such as alcohol, tobacco, and gasoline.