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When the Bank of Canada sells a government bond to a bank, reserves in the banking system
____ and the monetary base ____, everything else held constant.
A) increase; increases
B) increase; decreases
C) decrease; increases
D) decrease; decreases
Answer: D
Diff: 1 Type: MC Page Ref: 380
Skill: Recall
Objective List: 16.2 Discern who controls the monetary base and what causes it to change
When a bank sells a government bond to the Bank of Canada, reserves in the banking system
____ and the monetary base ____, everything else held constant.
A) increase; increases
B) increase; decreases
C) decrease; increases
D) decrease; decreases
Answer: A
Diff: 1 Type: MC Page Ref: 380
Skill: Recall
Objective List: 16.2 Discern who controls the monetary base and what causes it to change
When a bank buys a government bond from the Bank of Canada, reserves in the banking
system ____ and the monetary base ____, everything else held constant.
A) increase; increases
B) increase; decreases
C) decrease; increases
D) decrease; decreases
Answer: D
Diff: 1 Type: MC Page Ref: 380
Skill: Recall
Objective List: 16.2 Discern who controls the monetary base and what causes it to change
The monetary base declines when ____.
A) the Bank extends advances to banks
B) deposits at the Bank decrease
C) float increases
D) the Bank sells securities
Answer: D
Diff: 1 Type: MC Page Ref: 380
Skill: Recall
Objective List: 16.2 Discern who controls the monetary base and what causes it to change