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If a Bank's Deposits at the Bank of Canada Increase

Question 26

Multiple Choice

If a bank's deposits at the Bank of Canada increase by $1 million,then


A) the bank's assets increase by $1 million and the Bank of Canada's assets in the form of depository institution's reserves increase by $1 million.
B) the bank's assets increase by $1 million and the Bank of Canada's liabilities increase by $1 million.
C) the bank's assets increase by $1 million but there is no change at the Bank of Canada.
D) the net effect on the Bank of Canada and the bank is zero because assets always equal liabilities.

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