Assume That the Desired Reserve Ratio Is 20 Percent

question 196

Multiple Choice

Assume that the desired reserve ratio is 20 percent.Suppose that the Bank of Canada sells $500 of government securities to chartered banks and buys $500 of securities from individuals,who deposit the cash in chequing accounts.
-Refer to the above information.As a result of these transactions,the supply of money in the economy will:

• A) remain unchanged.
• B) rise by $500.
• C) fall by $100.
• D) fall by $500.