Assume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves. Assets Total reserves Loans Securities Total What is the required reserve ratio? 5% O 10% 25% 40% $5 billion 45 billion 50 billion $100 billion Liabilities and Net Worth Chequable deposits Total $100 billion $100 billion Suppose the Bank of Canada sells $8 million of bonds to a bond dealer, who pays the Bank of Canada by writing a cheque against the funds in her chequing account. What is the initial impact of this transaction? Chequable deposits fall by $8 million, and the banking system's holdings of securities fall by $8 million. The banking system's holdings of securities rise by $8 million, and the banking system's total reserves fall by $8 million. O The banking system's holdings of securities fall by $8 million, and the banking system's total reserves rise by $8 million. Chequable deposits fall by $8 million, and the banking system's total reserves fall by $8 million. As a result of the Bank of Canada's sale of $8 million of securities, chequable deposits in the banking system can potentially by as much as

Assume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves. Assets Total reserves Loans Securities Total What is the required reserve ratio? 5% O 10% 25% 40% $5 billion 45 billion 50 billion $100 billion Liabilities and Net Worth Chequable deposits Total $100 billion $100 billion Suppose the Bank of Canada sells $8 million of bonds to a bond dealer, who pays the Bank of Canada by writing a cheque against the funds in her chequing account. What is the initial impact of this transaction? Chequable deposits fall by $8 million, and the banking system's holdings of securities fall by $8 million. The banking system's holdings of securities rise by $8 million, and the banking system's total reserves fall by $8 million. O The banking system's holdings of securities fall by $8 million, and the banking system's total reserves rise by $8 million. Chequable deposits fall by $8 million, and the banking system's total reserves fall by $8 million. As a result of the Bank of Canada's sale of $8 million of securities, chequable deposits in the banking system can potentially by as much as

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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