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- 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
- 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