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Suppose that the public holds 50% of the money supply in currency and the reserve requirement is 20%.Banks hold no excess reserves.A customer deposits $6000 in her chequable deposit.
-How many deputy governors are there at the Bank of Canada?

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Quizplus · Accepted Answer

To calculate how much money will be created through the deposit, we need to first determine how much new reserves the bank will hold. Since the reserve requirement is 20%, the bank will need to hold 20% of the deposit amount ($6000) as reserves, or $1200. The remaining $4800 will be used to create new loans and deposits.

Since banks are holding no excess reserves, the maximum amount of new loans and deposits that can be created is equal to the initial deposit of $6000. This means that the money supply will increase by $6000.

The number of deputy governors at the Bank of Canada is not relevant to this calculation.

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