THE ECONOMICS OF MONEY,BANKING, AND FINANCIAL MARKETS 462

430 PA R T V Central Banking and the Conduct of Monetary Policy 14 If a bank sells $10 million of bonds back to the Bank of Canada in order to pay back $10 million on the advances it owes, what will be the effect on the level of chequable deposits? *15 If you decide to hold $100 less cash than usual and therefore deposit $100 in cash in the bank, what effect will this have on chequable deposits in the banking system if the rest of the public keeps its holdings of currency constant? CANSIM Questions 16 An important aspect of the money supply process is the money multiplier Get monthly data from 1968 to 2009 on Statistics Canada CANSIM II series V37145 (monetary base), V37152 (M1** (gross)), and V41552801 (M2** (gross)) from the Textbook Resources area of the MyEconLab a Calculate the M1** money multiplier What is its average value over your sample period? b Calculate the M2** money multiplier What is its average value? c Compare the two money multipliers d Does it appear that the money multipliers are increasing or decreasing? 17 Continuing from the previous question, compute the growth rates of M1 and M2 a What is the average M1 growth rate? Its variance? b What is the average M2 growth rate? Its variance? c Which monetary aggregate is more variable? WEB EXERCISES An important aspect of the supply of money is bank deposits with the Bank of Canada Go to www.osfibsif.gc.ca and locate financial data for banks This site reports the consolidated balance sheet for all banks a What is the current level of bank deposits with the Bank of Canada? b What is the change in bank deposits with the Bank of Canada since a year ago? c Based on (a) and (b), does it appear that bank reserves with the Bank of Canada are increasing or decreasing? Go to www.bankofcanada.ca and click on Rates and Statistics, then Indicators, and then choose Summary of Key Monetary Policy Variables a What is the 12-month growth rate of M2 (gross), M1**, and M2**? b What is the change in the 12-month growth rate in M2 (gross), M1**, and M2** since a year ago? Be sure to visit the MyEconLab website at www.myeconlab.com.This online homework and tutorial system puts you in control of your own learning with study and practice tools directly correlated to this chapter content On the MyEconLab website you will find the following appendices for this chapter: Appendix 16.1:The Bank of Canada s Balance Sheet and the Monetary Base Appendix 16.2:The M2+ Money Multiplier