Assume the Banking System Has No Excess Reserves, but the Desired

question 122

Multiple Choice

Assume the banking system has no excess reserves, but the desired reserve is 20 percent.Suppose the Bank of Canada purchases $10,000 in Canadian government securities from the Academy National Bank.What is the ultimate potential increase in the money supply?  

• A) $2,000 
• B) $8,000 
• C) $10,000 
• D) $50,000

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Definitions:

Price Increases

Price increases refer to the rise in the cost or value of goods and services over time, often measured by inflation rates.

Depression

A prolonged period of significant decline in economic activity and employment, more severe than a recession, marked by long-term unemployment and financial distress.

Stock Prices

Stock prices represent the current market value of a share of a company's stock, determined by the supply and demand for that stock in the marketplace and reflecting investor perceptions of the company's future prospects.

Unemployment

The condition of being jobless and actively seeking work, often measured as a percentage of the labor force and used as an indicator of economic health.