11.. Suppose the reserve ratio is 10 percent and banks do not hold excess reserves. Under these circumstances, suppose the Bank of Canada sells $60 million of bonds to the public. Which statement best describes the effects of this open-market operation? a. Bank reserves increase by $60 million, and the money supply eventually increases by $600 million. b. Bank reserves increase by $60 million, and the money supply eventually increases by $800 million. c. Bank reserves decrease by $60 million, and the money supply eventually decreases by $600 million. d. Bank reserves decrease by $60 million, and the money supply eventually decreases by $800 million. 3

11.. Suppose the reserve ratio is 10 percent and banks do not hold excess reserves. Under these circumstances, suppose the Bank of Canada sells $60 million of bonds to the public. Which statement best describes the effects of this open-market operation? a. Bank reserves increase by $60 million, and the money supply eventually increases by $600 million. b. Bank reserves increase by $60 million, and the money supply eventually increases by $800 million. c. Bank reserves decrease by $60 million, and the money supply eventually decreases by $600 million. d. Bank reserves decrease by $60 million, and the money supply eventually decreases by $800 million. 3

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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11.. Suppose the reserve ratio is 10 percent and banks do not hold excess reserves. Under these
circumstances, suppose the Bank of Canada sells $60 million of bonds to the public. Which statement
best describes the effects of this open-market operation?
+
a. Bank reserves increase by $60 million, and the money supply eventually increases by $600
million.
b. Bank reserves increase by $60 million, and the money supply eventually increases by $800
million.
c. Bank reserves decrease by $60 million, and the money supply eventually decreases by $600
million.
d. Bank reserves decrease by $60 million, and the money supply eventually decreases by $800
million.

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