AK_Chapter_10 - SOLUTIONS TO TEXT PROBLEMS Chapter 10 Questions for Review 1 2 3 4 5 6 7 8 9 Money is the most liquid asset available Commodity

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SOLUTIONS TO TEXT PROBLEMS Chapter 10 Questions for Review 1. Money is the most liquid asset available. 2. Commodity money = money with intrinsic value. Fiat money = money without intrinsic value. We use fiat. 3. A cheque can be written against them. They are a medium of exchange. 4. The Bank of Canada. 5. Purchases Canadian government bonds from the public on the open market. 6. It is more profitable to use the reserves to make loans. They are related through the money multiplier. 7. Interest rate on very short-term loans between commercial banks. A higher overnight rate reduces the money supply. 8. Reserve requirements are regulations on the minimum amount of reserves that banks must hold against deposits. An increase in reserve requirements decreases the money supply. 9. (1) the Bank of Canada does not control the amount of money that households choose to hold as deposits in banks; and (2) the Bank of Canada does not control the amount that commercial bankers choose to lend. Problems and Applications
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This note was uploaded on 06/27/2010 for the course ECONOMCIS Econ103 taught by Professor D.allen during the Winter '08 term at Simon Fraser.

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AK_Chapter_10 - SOLUTIONS TO TEXT PROBLEMS Chapter 10 Questions for Review 1 2 3 4 5 6 7 8 9 Money is the most liquid asset available Commodity

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