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If, after a deposit outflow, a bank needs an additional $3 million to meet its desired reserves,
the bank can ____.
A) reduce deposits by $3 million
B) increase loans by $3 million
C) sell $3 million of securities
D) repay its advances from the Bank of Canada
Answer: C
Diff: 1 Type: MC Page Ref: 303
Skill: Applied
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans
A bank with insufficient reserves can increase its reserves by ____.
A) lending overnight funds
B) calling in loans
C) buying short-term securities
D) buying provincial bonds
Answer: B
Diff: 1 Type: MC Page Ref: 303
Skill: Recall
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans
Of the following, which would be the first choice for a bank facing a reserve deficiency?
A) Call in loans
B) Borrow from the Bank of Canada
C) Sell securities
D) Borrow from other banks
Answer: D
Diff: 1 Type: MC Page Ref: 302 - 303
Skill: Recall
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans
In general, banks would prefer to acquire funds quickly by ____ rather than ____.
A) reducing loans; selling securities
B) reducing loans; borrowing from the Bank of Canada
C) borrowing from the Bank of Canada; reducing loans
D) "calling in" loans; selling securities
Answer: C
Diff: 2 Type: MC Page Ref: 302 - 303
Skill: Recall
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans