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Consider the following situation in the Canadian banking system: . The Bank of Canada purchases $3 million worth of government securities from an investment dealer
Consider the following situation in the Canadian banking system: . The Bank of Canada purchases $3 million worth of government securities from an investment dealer with a cheque drawn on the Bank of Canada. . The dealer deposits this cheque at Bank XYZ, a commercial bank. . The target reserve ratio for all banks is 30 percent. . All commercial banks operate with no excess reserves. . There is no cash drain. If Bank XYZ increases its loans to the maximum extent possible with its new excess reserves, the fourth-generation banks will be able to expand their loans by O A. $0.50 million. O B. $0.72 million. O C. $0.58 million. O D. $0.86 million, O E. $1.08 million
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