the economics of money, banking, and financial markets

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16.4 Multiple Deposit Creation: A Simple Model

1 ) When the Bank of Canada supplies the banking system with an extra dollar of reserves,
deposits increase by more than one dollar - a process called ____.
A) extra deposit creation
B) multiple deposit creation
C) expansionary deposit creation
D) stimulative deposit creation
Answer: B
Diff: 1 Type: MC Page Ref: 383 - 384
Skill: Recall
Objective List: 16.4 Utilize a simple model of multiple deposit creation, showing how the
central bank can control the level of deposits by setting the level of reserves

2. 
   

   When the Bank of Canada supplies the banking system with an extra dollar of reserves,
   deposits ____ by ____ than one dollar - a process called multiple deposit creation.
   A) increase; less
   B) increase; more
   C) decrease; less
   D) decrease; more
   Answer: B
   Diff: 1 Type: MC Page Ref: 383 - 384
   Skill: Recall
   Objective List: 16.4 Utilize a simple model of multiple deposit creation, showing how the
   central bank can control the level of deposits by setting the level of reserves

   
   


3. 
   

   If the desired reserve ratio is equal to 10 percent, a single bank can increase its loans up to a
   maximum amount equal to ____.
   A) its excess reserves
   B) 10 times its excess reserves
   C) 10 percent of its excess reserves
   D) its total reserves
   Answer: A
   Diff: 1 Type: MC Page Ref: 384
   Skill: Applied
   Objective List: 16.4 Utilize a simple model of multiple deposit creation, showing how the
   central bank can control the level of deposits by setting the level of reserves