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Consider a one-time open market purchase of bonds of 100 by the Bank of Canada(from a private bank). Suppose all private banks have the same
Consider a one-time open market purchase of bonds of 100 by the Bank of Canada(from a private bank). Suppose all private banks have the same reserve ratio of 4% and the general public's cash-to-deposit ratio is 0.
i. After all (infinite) rounds of "money creation/destruction", show the changes in the balance sheets of the private banking system, the Bank of Canada and the general public. By how much does the money supply increase/decrease?
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