Assume the desired reserve ratio is 25 percent and the Winnipeg Bank borrows $10,000 from the Bank of Canada.As a result:
A)chartered bank reserves are increased by $10,000.
B)the supply of money automatically declines by $7,500.
C)chartered bank reserves are increased by $7,500.
D)the supply of money is automatically increased by $10,000.

Question

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When the Winnipeg Bank borrows $10,000 from the Bank of Canada, its reserves increase by the full amount of the loan, which is $10,000.

Assume the Desired Reserve Ratio Is 25 Percent and the Winnipeg