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4. Suppose that the Bank of Canada conducts an open market purchase (OMO) of $1000 from a commercial bank. Assuming all banks' desired reserve ratio
4. Suppose that the Bank of Canada conducts an open market purchase (OMO) of $1000 from a commercial bank. Assuming all banks' desired reserve ratio is 0.10, or 10 percent, and currency drain ratio is 0. Answer the questions below: a. Show the effects of open market operation on Bank of Canada's balance sheet, and commercial bank's balance sheet. By how much monetary base increases? b. By how much could the total money supply in the economy expand? c. If banks' desired reserve ratio increases to 0.4. what is the size of the money multiplier and by how much the total money supply in the economy could expand? d. If currency drain ratio increases to 0.1 or 10%, what is the size of money multiplier? By how much the total money supply in the economy could expand
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