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6. Suppose the Bank of Canada buys $5 million worth of government securities from BMO, a commercial bank. Using T-account analysis, show what happens to
6. Suppose the Bank of Canada buys $5 million worth of government securities from BMO, a commercial bank.
- Using T-account analysis, show what happens to the balance sheets of the BoC and BMO immediately.
- If BMO does not want to hold any excess reserves, it will make more loans. Show the change for its balance sheet reflecting this lending.
- Using T-account analysis, show what happens to the balance sheet of the BMO when the borrower withdraws cash from BMO.
- What is the net change for the balance sheet of BMO after the withdrawal? Show the Taccount.
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Contemporary Financial Management
Authors: R. Charles Moyer, William J. Kretlow, James R. Mcguigan
7th Edition
0538877766, 9780538877763
