If the Bank of Canada were to conduct an open market sale, it would Select one: a. decrease the money supply and increase output. b. increase the money supply and decrease output. c. increase the money supply and increase output. d. decrease the money supply and decrease output
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- If the Bank of Canada were to conduct an open market purchase, it would Select one: a. decrease the money supply and decrease output. b. increase the money supply and decrease output. c. increase the money supply and increase output. d. decrease the money supply and increase output.A central bank can increase the money supply by: Select one: a. changing the quantities of required and excess reserves by altering the legal reserve ratio. b. changing the discount rate so as to encourage or discourage commercial banks in borrowing from the central banks. c. changing the bank reserves through the sale or purchase of government securities. d. reducing the discount rate to reduce the cost of borrowing from the central bank.BUSN5 CH2 WKSMultiple ChoiceIdentify the choice that best completes the statement or answers the question.1. Define economics.a) a financial and social systemb) the study of a country’s overall economic issuesc) the integration between consumers, families, and businessesd) the study of the choices that different entities make in allocating resources2. Macroeconomics focuses ona) the major issues facing the national economy, but has little or no relevance to individuals.b) smaller economic units such as individual consumers, families, and individual businesses operating within the economy.c) the major issues facing the national economy that may seem abstract, but directly affect an individual’s day-to-day life. d) the role of government, while microeconomics focuses on the private sector.3. After the collapse of the dot com bubble and the 9/11 terrorist attacks, the stock market depreciated and unemployment increased leading many to fear that the…
- If the Bank of Canada wanted to increase interest rates, it could Select one: a. increase the reserve requirement or implement an open market purchase. b. decrease the reserve requirement or implement an open market sale. c. decrease the reserve requirement or implement an open market purchase. d. increase the reserve requirement or implement an open market sale.Which of the following is the most accurate description of events when monetary authorities increase the size of commercial banks' excess reserves? Select one: a. The money supply is decreased, which increases the interest rate, and causes investment spending, output, and employment to decrease b. The money supply is increased, which decreases the interest rate, and causes investment spending, output, and employment to increase c. A rise in interest rates increases the money supply, causing a decrease in investment spending, output, and employment d. A fall in interest rates decreases the money supply, causing an increase in investment spending, output, and employmentIf the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $10, then this bank A. must increase its required reserves by $10. B. will initially see its total reserves increase by $10.50. C. will be able to make new loans up to a maximum of $9.50. D. All of the above are correct.
- AsapIf the Central Bank decides to decrease the money supply, it will Select one: a. purchase government bonds. b. sell government bonds. C. purchase corporate bonds. d. reduce interest rates.The central bank of the fictitious country "Alpha" raises bank reserves by $200. What effect will the increase in bank reserves have on the money supply in each of the following situations: a. If the banking system is a 100% reserve banking system, the money supply will increase by $ b. The banking system is a fractional reserve banking system with a desired reserve deposit ratio of 0.25, the money supply will increase by $1
- Suppose the banks in an economy have a reserve-deposit ratio of 10 percent and the currencydeposit ratio is 20 percent.a. If the Central Bank increases the monetary base by $400 through open market operations, what will be the increase in the money supply?b. If the Central Bank increases the discount rate and firms react by increasing the reservedeposit ratio to 15 percent, what is the change in the multiplier? Will this change increase or decrease the money supply?Money: 1.Explain the functions of the central bankA purchase of U.S. government securities by the Fed causes A. a multiple contraction of the money supply because deposits fall by more than the amount of the securities purchased. B. a contraction of the money supply equal to the amount of the securities because all other transactions occur within the banking system. C. an expansion of the money supply equal to the amount of the securities because all other transactions occur within the banking system. D. a multiple expansion of the money supply because the required reserve ratio is less than one
