15. The reserve ratio, open-market operations, and the money supply Assume that banks do not hold excees reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis. suppose the banking system has total reserves of $300. Determine the money multiplier and the money supply for ea ch reserve requirement listed in the following table. Reserve Requirement Money Supply (Percent) Simple Money Multiplier (Dollars) 5 V _' 10 V v A higher reserve requirement is associated with a V money supply. Suppose the Bank of Canada wants to increase the money supply by $200. Again, you can assume that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%, the Bank of Canada will use openmarket operations to V _ worth of Canadian government bonds. Now, suppose that, rather than immediately lending out all excess reserves, banks begin holding some excess reserves due to uncertain economic conditions. Specically, banks increase the percentage of deposits held as reserves from 10% to 25%. This increase in the reserve ratio causes the money multiplier to V to V . Under these conditions, the Bank of Canada would need to V _ worth of Canadian government bonds in order to increase the money supply by $200. which of the following statements help to explain why, in the real world, the Bank of Canada cannot precisely control the money supply? Check all! that 399W- C] The Bank of Canada cannot control the amount of money that households choose to hold as currency. C] The Bank of Canada cannot prevent banks from lending out required reserves. C] The Bank of Canada cannot control whether and to what extent banks hold excess reserves