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Sara deposits $100,000 in Royal Bank and John borrows $80,000 from Royal Bank to buy a car from Oregan car dealer. Oregan car dealer deposits
Sara deposits $100,000 in Royal Bank and John borrows $80,000 from Royal Bank to buy a car from Oregan car dealer. Oregan car dealer deposits the $80,000 in CIBC. Assume that there is no currency drain and desired reserve ratio is 20%.
- Reflect the above transactions in T-accounts for both banks
- The Central Bank noticed that commercial Banks are expanding money supply too much. Would the Central Bank Increase or decrease the desired reserve ratio? Explain
- At the end of the day the manager of Royal Bank found that they have a surplus amount of $10,000 in the LVTS (Large Value Transfer System), and decided not to touch it. If the target of the overnight rate is 0.25%. How much would Bank of Canada charge/pay to Royal bank?
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