BANKING SYSTEM ($Bs)

ASSETS

Reserves 35.0

Government Securities 200.0

Loans 155.0

BANK OF CANADA($Bs)

ASSETS

Government Securities 75.0

Advances to Chartered Banks 40.0

BANKING SYSTEM ($Bs)

LIABILITIES

Deposits 350.0

Advances from BOC 40.0

BANK OF CANADA($Bs)

LIABILITIES

Chartered Bank Reserves 35.0

Government Deposits 80.0

Bank of Canada implements monetary policy and drawdowns $20 billion of Government of Canada money. Assume the reserve ratio is 10%.

1. Given the drawdown, which of the following is a balance sheet Asset change for the Bank of Canada?

Government securities decrease by $20 billion.

Chartered bank reserves increase by $20 billion.

Government deposits decrease by $20 billion.

Government deposits increase by $20 billion.

None.

2. Given the drawdown, which of the following is a balance sheet Liability change for the Bank of Canada?

Government securities decrease by $20 billion.

Chartered bank reserves increase by $20 billion.

Government deposits decrease by $20 billion.

Government deposits increase by $20 billion.

Chartered bank reserves decrease by $20 billion and government deposits increase by $20 billion.

3. What balance sheet Asset changes will occur for Chartered Banks (before multiplier process begins)?

Government securities increase by $20 billion.

Reserves increase by $20 billion.

Reserves decrease by $20 billion.

Deposits increase by $20 billion.

None.

4. What balance sheet Liabilities changes will occur for the Chartered Banks (before the multiplier process begins)?

Government securities increase by $20 billion.

Reserves increase by $20 billion.

Deposits decrease by $20 billion.

Deposits increase by $20 billion.

5. After the money multiplier process, what is the maximum amount of money the Chartered Banking system can reduce?

$20 Billion

$100 Billion

$200 Billion

$400 Billion

6. What two accounts on the consolidated balance sheet of the Chartered Banks will change as the result of the maximum amount of money reduced?

Loans and Advances from BOC

Reserves and Advances from BOC

Reserves and Deposits

Loans and Deposits