Fill in the blanks to make the following statements correct. Answer these questions in the sequence given.

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Fill in the blanks to make the following statements correct. Answer these questions in the sequence given.

a. Suppose the Bank of Canada purchases a \(\$ 100 0\) bond from Bob's Financial Firm, and Bob's deposits its cheque at the CIBC. This is \(\mathrm{a}(\mathrm{n})\) ________ deposit to the banking system and will allow the commercial banks to _________.

b. Continuing on from part (a), if the CIBC has a target reserve ratio of 5 percent, it will keep _________ dollars as reserves and will lend __________ dollars.

c. Assuming there is no cash drain from the banking system, the ultimate effect is a(n)_______ in deposits in the banking system of _________ \(\quad \times \overline{\$ 100 } 0 =\) _____________

d. Suppose the Bank of Canada sells a \(\$ 100 0\) bond to Bob's Financial Firm, and Bob's pays for that bond with a cheque drawn on its account at the CIBC. This is a(n) _______ of funds from the banking system and will cause the commercial banks to _________

e. If the CIBC pays the \(\$ 100 0\) from its reserves, its reserve ratio will then be ________ its target rate of 5 percent. If the CIBC keeps its reserves at the new level, its loans must fall by_______  to restore the  5 -percent target reserve ratio

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Macroeconomics

ISBN: 9780133910445

15th Edition

Authors: Christopher T S Ragan

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