the economics of money, banking, and financial markets

465 $

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13. 
    

    When the Bank of Canada buys $100 worth of bonds from First National Bank, reserves in
    the banking system ____.
    A) increase by $100
    B) increase by more than $100
    C) decrease by $100
    D) decrease by more than $100
    Answer: A
    Diff: 1 Type: MC Page Ref: 378 - 379
    Skill: Applied
    Objective List: 16.2 Discern who controls the monetary base and what causes it to change

    
    


14. 
    

    When the Bank of Canada sells $100 worth of bonds to First National Bank, reserves in the
    banking system ____.
    A) increase by $100
    B) increase by more than $100
    C) decrease by $100
    D) decrease by more than $100
    Answer: C
    Diff: 1 Type: MC Page Ref: 380
    Skill: Applied
    Objective List: 16.2 Discern who controls the monetary base and what causes it to change

    
    


15. 
    

    If a person selling bonds to the Bank of Canada cashes the Bank's cheque, then reserves
    ____ and currency in circulation ____, everything else held constant.
    A) remain unchanged; declines
    B) remain unchanged; increases
    C) decline; remains unchanged
    D) increase; remains unchanged
    Answer: B
    Diff: 2 Type: MC Page Ref: 378 - 380
    Skill: Recall
    Objective List: 16.2 Discern who controls the monetary base and what causes it to change

    
    


16. 
    

    The effect of an open market purchase on reserves differs depending on how the seller of the
    bonds keeps the proceeds. If the proceeds are kept in ____, the open market purchase has no
    effect on reserves; if the proceeds are kept as ____, reserves increase by the amount of the
    open market purchase.
    A) deposits; deposits
    B) deposits; currency
    C) currency; deposits
    D) currency; currency
    Answer: C
    Diff: 2 Type: MC Page Ref: 380
    Skill: Recall
    Objective List: 16.2 Discern who controls the monetary base and what causes it to change