Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed

image text in transcribed

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 Canada sells $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. c. The Bank of Canada buys $7 billion of securities from chartered banks. Show the new balance sheet numbers in column 3 of each table. Instructions:All answers below are to be entered as whole numbers. Consolidated Balance Sheet: All chartered banks (billions of dollars) (1) (2) (3) Assets: Cash reserves $33 Securities 60 Loans 60 Liabilities: Demand deposits $150 Advances from Bank of Canada Balance She et: Bank of Canada (billions of dollars) (1) (2) (3) Assets Securities $60 Advances to chartered banks Liabilities $33 Reserves of chartered banks Government of Canada deposits Notes in circulation 27 d. Now review all of the above 3 transactions, asking yourself these three questions: (1) What change, if any, took place in the money supply as a direct and immediate result of each transaction? (2) What increase or decrease in chartered banks' cash reserves took place in each transaction? (3) Assuming a desired reserve ratio of 20 percent, what change in the money-creating potential of the chartered banking system occurred as a result of each transaction? Transaction a: 1. The money supply (Click to select) 2. Reserves(Click to select)from $33 to $ 3. Money-creating potential(Click to select) billion. billion by $ Transaction b: billion 1. The money supply (Click to select)by $ 2. Reserves(Click to select) from $33 to $ by $ | billion billion 3. Money-creating potential (Click to select) Transaction c 1. The money supply (Click to select)) 2. Reserves( (Click to select) from $33 to $ 3. Money-creating potential(Click to select) billion billion by $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac

10th Edition

0324380674, 978-0324380675

More Books

Students also viewed these Accounting questions

Question

How has health psychology expanded into traditional health fields?

Answered: 1 week ago

Question

Did you add the logo at correct size and proportion?

Answered: 1 week ago