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First National Bank has $80 million in chequable deposits,$15 million in deposits with the Bank of Canada,$5 million cash in the bank vault,and $5 million in government bonds.
-If the Bank of Canada conducts a $10 million open-market sale and the reserve requirement is 20%,the monetary base will:

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An open-market sale by the Bank of Canada reduces the level of reserves in the banking system. In this case, the sale of $10 million will reduce the level of reserves held by banks by $10 million. Given that the required reserve ratio is 20%, this reduction in reserves will decrease the monetary base by $50 million (10/0.2), not increase it. Therefore, the correct option is C.

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