The Initial Impact of the Bank of Canada's Open Market

question 57

Multiple Choice

The initial impact of the Bank of Canada's open market sale of government securities to commercial banks is

• A)an increase in the money supply by some multiple of the dollar volume of the sale.
• B)an increase in commercial bank deposits at the Bank of Canada.
• C)a fall in the money supply by some multiple of the dollar volume of the sale.
• D)a reduction of the commercial banking system's reserve deposits at the Bank of Canada.

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Definitions:

After-tax Earnings

The net income a company generates after all taxes have been deducted from total revenue.

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity which is used to finance its overall operations and growth.

Residual Dividend Policy

A strategy where dividends are paid after all project capital needs and working capital requirements are met.

Dividend Payout Ratio

The percentage of net income paid to shareholders in the form of dividends.