470 $
© 2014 Pearson Canada Inc.$
The Bank does not tightly control the monetary base because it does not completely control
____.
A) open market purchases
B) open market sales
C) borrowed reserves
D) the rate
Answer: C
Diff: 1 Type: MC Page Ref: 383
Skill: Recall
Objective List: 16.2 Discern who controls the monetary base and what causes it to change
Subtracting borrowed reserves from the monetary base obtains ____.
A) reserves
B) high-powered money
C) the nonborrowed monetary base
D) the borrowed monetary base
Answer: C
Diff: 1 Type: MC Page Ref: 383
Skill: Recall
Objective List: 16.2 Discern who controls the monetary base and what causes it to change
The relationship between borrowed reserves, the nonborrowed monetary base, and the
monetary base is ____.
A) MB = MBn - BR
B) BR = MBn - MB
C) BR = MB - MBn
D) MB = BR - mn
Answer: C
Diff: 1 Type: MC Page Ref: 383
Skill: Recall
Objective List: 16.2 Discern who controls the monetary base and what causes it to change
- Explain two ways by which the Bank of Canada can increase the monetary base. Why is the
effect of Bank of Canada actions on bank reserves less exact than the effect on the monetary
base?
Answer: The Bank can increase the monetary base by purchasing government bonds and by
extending advances to banks. If the person selling the security chooses to keep the proceeds in
currency, bank reserves do not increase. Because the Bank cannot control the distribution of the
monetary base between reserves and currency, it has less control over reserves than the base.
Diff: 2 Type: SA Page Ref: 383
Skill: Recall
Objective List: 16.2 Discern who controls the monetary base and what causes it to change