Suppose that the desired reserve ratio is 25 percent and the Bank of Canada buys $1 million of securities from the public. As a result of this transaction the supply of money is:

Question 53 options:

a)

not directly affected, but the money-creating potential of the chartered banking system is increased by $4 million.

b)

directly increased by $4 million and the money-creating potential of the chartered banking system is increased by $4 million.

c)

directly reduced by $1 million and the money-creating potential of the chartered banking system is decreased by $12 million.

d)

directly increased by $1 million and the money-creating potential of the chartered banking system is increased by $4 million.

e)

None of the above