(a) For ScenarioIabove, describe how Ecobank305's balance sheet will change following the$90Mopen market purchase by the BoC.

Question 1 (1 point) Answer (a)-(c) on a white sheet of paper: which you will attach in your answer to this question, Answer (d) in the white space below (so in Brightspace). A simplied balance sheet of the Bank of Canada (BoC) looks as follows: Bank of Canada Liabilities Securities Currency in circulation Loans to nancial institutions Reserves This question relates to the mechanism behind money creation, which involves the BoC, the Banking sector and the public. Start your discussion just after the BoC buys $90M worth of Government of Canada bonds in an open market purchase froriieabank called \"Ecobank305\". Assume in this question that: o All banks have a desired reserve raEWf 10%. 0 Banks will not hold any reserves beyond their desired reserves because there are sufciently many lending opportunities 0 The public will not change their currency holdings In this question we describe two alternative scenarios through which Ecobank3 05 and other banks bring back their reserves to the level they desire to hold, namely Scenario 1: banks lend out the funds to the public; and Scenario 11: banks buy securities from the public. (a) For Scenario I above, describe how Ecobank305's balance sheet will change following the $90M open market purchase by the 30C. (b) For Scenario 1] above, describe how Ecobank305's balance sheet will change following the $90M open market purchase by the BoC. (c) For Scenario 11 above, describe using T-accounts how the balance sheets of (i) BoC, (ii) the banking sector, and (iii) the public have changed after the new equilibrium has been reached. [if you cannot answer this question, then earn part-marks by answering this question for Scenario I ] (d) In this question we assumed that \"The public will not change their currency holdings\". Explain how this assumption is important for \"money creation\". Specically, if the currency holdings of the public were equal to 40% of their deposits, then how would that affect money creation after the moment the BoC buys $90m worth of bonds from Ecobank305