If the Bank of Canada sells $100 of securities through a commercial bank when the reserve requirement is 10 percent,the money supply may ultimately

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When the Bank of Canada sells securities, it effectively takes money out of the banking system because the commercial bank pays for these securities with reserves. With a 10 percent reserve requirement, this action reduces the base from which banks can create money through loans, leading to a potential maximum decrease in the money supply of $1,000, following the money multiplier effect.

If the Bank of Canada Sells $100 of Securities Through