Assume That the Currency-Deposit Ratio Is 0

question 30

Multiple Choice

Assume that the currency-deposit ratio is 0.4.The Bank of Canada carries out open-market operations,purchasing $1,000,000 worth of bonds from banks.This action increased the money supply by $1,750,000.What is the reserve-deposit ratio?

• A)0.2
• B)0.3
• C)0.4
• D)0.45

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Definitions:

Marginal Tax Rate

The rate at which your last dollar of income is taxed, indicating the percentage of tax applied to your next dollar of taxable income.

Coupons

The interest payments made to bondholders, typically on an annual or semi-annual basis.

Yield-to-maturity

The total return anticipated on a bond if it is held until the end of its lifetime, taking into account both interest payments and capital gains or losses.

After-tax Rate

The rate of return on an investment after accounting for taxes, giving a more accurate reflection of the actual take-home returns.