Assume That the Desired Reserve Ratio for the Chartered Banks

question 35

Multiple Choice

Assume that the desired reserve ratio for the chartered banks is 25 percent. If Bank of Canada buys $3 billion in government securities from chartered banks we can say that, as a result of this transaction, the lending ability of the chartered banking system will:

• A) decrease by $9 billion.
• B) increase by $9 billion.
• C) increase by $15 billion.
• D) increase by $12 billion. McConnell - Chapter 13 #98 The following are simplified consolidated balance sheets for the chartered banking system and the Bank of Canada. Do not cumulate your answers; that is, do return to the data given in the original balance sheets in answering each question. Assume a desired reserve ratio of 5 percent for the chartered banks. All figures are in billions of dollars. CONSOLIDATED BALANCE SHEET: CHARTERED BANKING SYSTEM BALANCE SHEET: BANK OF CANADA

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Definitions:

Regression

A statistical method used to model and analyze relationships between variables.

Obtained Value

The actual value or result achieved in an experiment or study, typically used in statistical analysis to compare against theoretical values.

Critical Value

The threshold value that the test statistic must exceed in order for the null hypothesis to be rejected in a hypothesis test.

Significance Level

The threshold chosen by the researcher for rejecting the null hypothesis; commonly set at 0.05 or 5%.