Consider the following situation in the Canadian banking system:

• An investment dealer withdraws $10 million from its account at Bank XYZ to purchase government securities from the Bank of Canada.
• As a result, $10 million has been withdrawn from the Canadian banking system.
• The target reserve ratio for all banks is 10%.
• All commercial banks operate with no excess reserves.
• There is no cash drain.

TABLE 26-5 Refer to Table 26-5. Assume that Bank XYZ has decreased its loans and re-established its target reserve ratio. The second-generation banks in this scenario will

Select one:

a. decrease their loans by $9.0 million.

b. not have to change their loan positions.

c. increase their loans by $9.0 million.

d. increase their loans by $8.1 million.

e. decrease their loans by $8.1 million.