The Following Is a Simplified Consolidated Balance Sheet for the Chartered

question 227

Multiple Choice

The following is a simplified consolidated balance sheet for the chartered banking system and the Bank of Canada. Assume a desired reserve ratio of 5 percent for the chartered banks. All figures are in billions of dollars.


-Refer to the above information,suppose the Bank of Canada sells $2 in securities directly to the chartered banks.As a result of this transaction,the supply of money:

• A) will directly increase by $2 and the money-creating potential of the chartered banking system will increase by $38.
• B) will directly decrease by $2 and the money-creating potential of the chartered banking system will decrease by $40.
• C) is not directly affected,but the money-creating potential of the chartered banking system will decrease by $40.
• D) will decrease by $2,but the money-creating potential of the chartered banking system will not be affected.

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Definitions:

Protoplasts

Plant, bacterial, or fungal cells that have had their cell wall removed, exposing the cell membrane and internal contents.

"Eyes"

Sensory organs in animals and humans that are specialized for vision, detecting light and allowing for sight.

Protoplasts

Cells that have had their cell wall removed, exposing the plasma membrane and allowing for study or manipulation of cellular processes.

Runners

A type of plant stem that grows horizontally over the ground and can produce new plants at its nodes, a method of asexual reproduction.