In the table below you will find simplified consolidated balance sheets for the chartered banking system and the Bank of Canada. Use columns 1-3 to indicate how the balance sheets would read after each of transactions in parts (a) to (c) is completed. Do not cumulate your answers; that is, analyze each transaction separately, starting in each case from the numbers provided. All accounts are in billions of dollars.

a.A decline in the bank rate prompts chartered banks to borrow an additional $6 billion from the Bank of Canada. Show the new balance-sheet figures in column 1 of each table.

b.The Bank of Canadasells $8 billion in securities to the public, who pay for the bonds with cheques.Show the new balance sheet figures in column 2 of each table.

Consolidated Balance Sheet: All chartered banks (billions of dollars) (1) (2) (3) Assets : Cash reserves $34 Securities 58 Loans 62 Liabilities: Demand deposits $150 Advances from Bank of Canada 4 Balance Sheet: Bank of Canada (billions of dollars) (1) (2) (3) Assets : Securities $60 S Advances to chartered banks 4 Liabilities: Reserves of chartered banks $34 Government of Canada deposits 3 Notes in circulation 27