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In the simple deposit expansion model, if the desired reserve ratio is 20 percent and the Bank
of Canada increases reserves by $100, chequable deposits can potentially expand by ____.
A) $100
B) $250
C) $500
D) $1,000
Answer: C
Diff: 1 Type: MC Page Ref: 388
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
In the simple deposit expansion model, if the desired reserve ratio is 10 percent and the Bank
of Canada increases reserves by $100, chequable deposits can potentially expand by ____.
A) $100
B) $250
C) $500
D) $1,000
Answer: D
Diff: 1 Type: MC Page Ref: 388
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
In the simple deposit expansion model, an expansion in chequable deposits of $1,000 when
the desired reserve ratio is equal to 20 percent implies that the Bank of Canada ____.
A) sold $200 in government bonds
B) sold $500 in government bonds
C) purchased $200 in government bonds
D) purchased $500 in government bonds
Answer: C
Diff: 2 Type: MC Page Ref: 388
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
In the simple deposit expansion model, an expansion in chequable deposits of $1,000 when
the desired reserve ratio is equal to 10 percent implies that the Bank of Canada ____.
A) sold $1,000 in government bonds
B) sold $100 in government bonds
C) purchased $1000 in government bonds
D) purchased $100 in government bonds
Answer: D
Diff: 1 Type: MC Page Ref: 388
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