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Unless otherwise noted, the following assumptions are made in all the applied problems: the desired reserve ratio on chequable deposits is 10%, banks do not
Unless otherwise noted, the following assumptions are made in all the applied problems: the desired reserve ratio on chequable deposits is 10\%, banks do not hold any excess reserves, and the public's holdings of currency do not change. 16. If the Bank of Canada sells $2 million of bonds to the First National Bank, what happens to reserves and the monetary base? Use T-accounts to explain your answer. 17. If the Bank of Canada sells $2 million of bonds to Irving the Investor, who pays for the bonds with a briefcase filled with currency, what happens to reserves and the monetary base? Use T-accounts to explain your answer. 18. If the Bank of Canada lends five banks a total of $100 million, but depositors withdraw $50 million and hold it as currency, what happens to reserves and the monetary base? Use T-accounts to explain your answer. 19. Using T-accounts, show what happens to chequable deposits in the banking system when the Bank of Canada lends \$1 million to the First National Bank
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