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Which of the following statements are true or false regarding factors that can lead to an decrease of the money supply
Which of the following statements are true or false regarding factors that can lead to an decrease of the money supply. a. The Bank of Canada increases the bank rate True O False b. The Bank of Canada purchases government bonds from commercial banks. O True O False c. The Bank of Canada increases the required reserve ratio, O True O False d. Due to a higher economic stability, commercial banks choose to keep less money as reserve. O True O False e. The Bank of Canada purchases US dollars (paid in Canadian dollars). True O False
f. The Canadians loose confidence in the banking system and start holding a larger fraction of their money in the form of currency outside banks. OTrue O False
Expert Solution
Answer:
A) true,. ( A rise in the bank rate means that the interest charge from commercial bank will increase and it would force commercial bank to increase their interest when will reduce the borrowing by public there by money supply decrease.)
B) false (purchases government bonds from commercial bank leads to increase the stock of money held by the general public)
C) true (increases required reserve ratio leads to less lending to public so it leads to decresed money supply)
D) false( less money reserve leads to high lending power to commercial bank there by money supply increases in public)
E)true ( by purchasing us dollers by Canadian doller it will decrease in currency stocked ,it will effect as decrease in money supply)
F) true ( holding money in out side countries leads to shortage money in own country ,there by decreases money supply).
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