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The Following Are Simplified Consolidated Balance Sheets for the Chartered

Question 35

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The following are simplified consolidated balance sheets for the chartered banking system and the Bank of Canada.Do not cumulate your answers; that is, do return to the data given in the original balance sheets in answering each question.Assume a desired reserve ratio of 5 percent for the chartered banks.All figures are in billions of dollars.CONSOLIDATED BALANCE SHEET: CHARTERED BANKING SYSTEM The following are simplified consolidated balance sheets for the chartered banking system and the Bank of Canada.Do not cumulate your answers; that is, do return to the data given in the original balance sheets in answering each question.Assume a desired reserve ratio of 5 percent for the chartered banks.All figures are in billions of dollars.CONSOLIDATED BALANCE SHEET: CHARTERED BANKING SYSTEM BALANCE SHEET: BANK OF CANADA Refer to the above information.Suppose the Bank of Canada buys $2 in securities from the public.As a result of this transaction, the supply of money will: A) directly increase by $2 and the money-creating potential of the chartered banking system will increase by $38. B) directly increase by $40 and the money-creating potential of the chartered banking system will increase by $800. C) directly increase by $2 and the money-creating potential of the chartered banking system will be unaffected. D) be unaffected but the money-creating potential of the chartered banking system will increase by $40. BALANCE SHEET: BANK OF CANADA
The following are simplified consolidated balance sheets for the chartered banking system and the Bank of Canada.Do not cumulate your answers; that is, do return to the data given in the original balance sheets in answering each question.Assume a desired reserve ratio of 5 percent for the chartered banks.All figures are in billions of dollars.CONSOLIDATED BALANCE SHEET: CHARTERED BANKING SYSTEM BALANCE SHEET: BANK OF CANADA Refer to the above information.Suppose the Bank of Canada buys $2 in securities from the public.As a result of this transaction, the supply of money will: A) directly increase by $2 and the money-creating potential of the chartered banking system will increase by $38. B) directly increase by $40 and the money-creating potential of the chartered banking system will increase by $800. C) directly increase by $2 and the money-creating potential of the chartered banking system will be unaffected. D) be unaffected but the money-creating potential of the chartered banking system will increase by $40. Refer to the above information.Suppose the Bank of Canada buys $2 in securities from the public.As a result of this transaction, the supply of money will:


A) directly increase by $2 and the money-creating potential of the chartered banking system will increase by $38.
B) directly increase by $40 and the money-creating potential of the chartered banking system will increase by $800.
C) directly increase by $2 and the money-creating potential of the chartered banking system will be unaffected.
D) be unaffected but the money-creating potential of the chartered banking system will increase by $40.

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