the economics of money, banking, and financial markets

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8. 
   

   If, after a deposit outflow, a bank needs an additional $3 million to meet its desired reserves,
   the bank can ____.
   A) reduce deposits by $3 million
   B) increase loans by $3 million
   C) sell $3 million of securities
   D) repay its advances from the Bank of Canada
   Answer: C
   Diff: 1 Type: MC Page Ref: 303
   Skill: Applied
   Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans

   
   


9. 
   

   A bank with insufficient reserves can increase its reserves by ____.
   A) lending overnight funds
   B) calling in loans
   C) buying short-term securities
   D) buying provincial bonds
   Answer: B
   Diff: 1 Type: MC Page Ref: 303
   Skill: Recall
   Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans

   
   


10. 
    

    Of the following, which would be the first choice for a bank facing a reserve deficiency?
    A) Call in loans
    B) Borrow from the Bank of Canada
    C) Sell securities
    D) Borrow from other banks
    Answer: D
    Diff: 1 Type: MC Page Ref: 302 - 303
    Skill: Recall
    Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans

    
    


11. 
    

    In general, banks would prefer to acquire funds quickly by ____ rather than ____.
    A) reducing loans; selling securities
    B) reducing loans; borrowing from the Bank of Canada
    C) borrowing from the Bank of Canada; reducing loans
    D) "calling in" loans; selling securities
    Answer: C
    Diff: 2 Type: MC Page Ref: 302 - 303
    Skill: Recall
    Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans