Question

The big 5 commercial banks consist of cibc, scotiabank, bmo bank of montreal, rbc royal bank, and TD Canada Trust. which of the following statements about the banking system in canada is true?

a. the bank of canada uses reserve requirements to change the money supply.
b. the bank of canada sets reserve requirements that banks must follow.
c. banks in canada practise fractional-reserve banking.
one of the bank of canada's tools for changing the money supply is____.
in order to increase the number of dollars in the canadian economy (the money supply), the bank of canada will____canadian government bonds.

Answer 1

The correct statement about the banking system in Canada is that the Bank of Canada sets reserve requirements that banks must follow.

Step-by-step explanation:

The correct statement about the banking system in Canada is:

b. The Bank of Canada sets reserve requirements that banks must follow.

Reserve requirements refer to the percentage amount of a bank's total deposits that it is legally required to hold as cash or deposit with the central bank. In Canada, the Bank of Canada determines and sets the reserve requirements that banks must adhere to. This helps regulate the money supply in the economy.

One of the Bank of Canada's tools for changing the money supply is open market operations. This involves buying or selling government bonds with banks, which affects the level of reserves in the banking system and, consequently, the money supply.