the economics of money, banking, and financial markets

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© 2014 Pearson Canada Inc.$

4. In the simple deposit expansion model, if the Bank of Canada purchases $100 worth of bonds
   from a bank that previously had no excess reserves, the bank can now increase its loans by
   ____.
   A) $10
   B) $100
   C) $100 times the reciprocal of the desired reserve ratio
   D) $100 times the desired reserve ratio
   Answer: B
   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

5 ) In the simple deposit expansion model, if the Bank of Canada purchases $100 worth of bonds
from a bank that previously had no excess reserves, deposits in the banking system can
potentially increase by ____.
A) $10
B) $100
C) $100 times the reciprocal of the desired reserve ratio
D) $100 times the desired reserve ratio
Answer: C
Diff: 1 Type: MC Page Ref: 387
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

6. The formula for the simple deposit multiplier can be expressed as ____.

A) △R = × △T

B) △D = × △R

C) △r = × △T

D) △R = × △D

Answer: B
Diff: 1 Type: MC Page Ref: 387
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