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Assume that banks do not hold excess 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 $500. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. Reserve Requirement Money Supply (Percent) Simple Money Multiplier (Dollars) 5 V V 10 V V A lower 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. Specifically, 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 apply. C] The Bank of Canada cannot control the amount of money that households choose to hold as currency. D 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. IS. :serves, banks begin holding some excess reserves due to uncertain economic :ld as reserves from 10% to 25%. This increase in the reserve ratio causes the a Bank of Canada would need to V worth of )3: $200. buy old, the Bank of Canada cannot m control the money supply? Check all that Money Supply Simple Money Multiplier ( Dollars) 0.5 nt is associat 1 a money supply. 5 da wants to it the money supply by $200. Again, you can a rency. If the 10 requirement is 10%, the Bank of Canada wil worth c ian government bonds. 20Money Supply Simple Money Multiplier ( Dollars) 0.5 ent is associat a money supply. hada wants to it the money supply by $200. Again, you can assume that b 5 currency. If the requirement is 10%, the Bank of Canada will use open-m worth c 10 ian government bonds. 20 er than immedia ding out all excess reserves, banks begin holding some ex 100% +mMoney Supply Simple Money Multiplier (Dollars) v v t is associated with a supply. a wants to increase the money s 200. Again, you can assume that b 'ency. If the reserve requirement e Bank of Canada will use openm. worth of Canadian govemm Money Supply Simple Money Multiplier (Dollars) _7 V V V t is associated with a supply. 500 a wants to increase the money s 200. Again, you can assume that bank 2,500 "ency. If the reserve requirement e Bank of Canada will use openmark: worth of Canadian govemm 5,000 10,000 han immediately lending out all : rues, banks begin holding some exces Money Supply Simple Money Multiplier ( Dollars) t is associated with a money supply. a wants to increase th larger supply by $200. Again, you can assume ency. If the reserve It smaller t is 10%, the Bank of Canada will use worth of canadia ent bondsSuppose 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. [f the reserve requirement is 10%, the Bank of Canada will use openmarket operations to V worth of Canadian government bonds. pose that, rather than immediately lending out all excess reserves, banks begin holding some excess reserves due to uncertain economic 5. Specically, banks increase the percentage of deposits held as reserves from 10% to 25%. This increase in the reserve ratio causes the ultiplier to V to V . Under these conditions, the Bank of Canada would need to V 3; worth of suppose that, rather than immediately lending out all excess reserves, banks begin holding some excess reserves due to uncertain economic :ions. Specically, banks increase the percentage of deposits held as reserves from 10% to 25%. This increase in the reserve ratio causes the y multiplier to V to V . Under these conditions, the Bank of Canada would need to V worth of . in order to increase the money supply by $200. lian governme I of the foilowi ents help to explain why, in the real world, the Bank of Canada cannot precisely control the money supply? Check all that that, rather than immediately lending out all excess reserves, banks begin holding some excess reserves due to uncertain economic -ecically, banks increase the percentage of deposits held as reserves from 10% to 25%. This increase in the reserve ratio causes the lier to V to V . Under these conditions, the Bank of Canada would need to 7 worth of imment bonds - to increase the money supply by $200. 1 'ollowing state Bank of Ca na I lp to explain why, in the real world, the Bank of Canada cannot precisely control the money supply? Check all that t control the amount of money that households choose to hold as currency. Bank of Canal t prevent banks from lending out required reserves. Bank of Canada cannot control whether and to what extent banks hold excess reserves

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