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ANSWER QUESTION D AND E

Suppose the Canadian economy has only two commercial banks: Bank A and Bank B. The following table shows their current balance sheets in dollars. The money supply in period 1 Bank A Bank B Assets Liabilities Assets Liabilities 2,636.9 1,684.52 2,193.9 1,401.52 443 283 Deposits Loans Reserve b. Suppose that the banks cannot make additional loans because they would exceed their desire reserve ratio (both banks have he same reserve ratio). What is the reserve ratio? Express your answer in percentage rounded to the nearest first decimal. 16.8 Correct response: 16.8 C. Suppose that individuals hold 139 dollars in cash. What is the money supply? Express your answer in dollars rounded to the nearest second decimal. 4460.42 d. Suppose the Bank of Canada prints 55 dollars and distributes them among the Canadian population. If individuals do not keep money outside banks as cash, what will be the long term effect of the policy on the money supply? Use the reserve ratio that you computed in a previous question. Round your answer to the nearest integer. The money supply will increase by dollars e. Suppose the Bank of Canada prints 55 dollars and distributes them among the Canadian population. If the people keep 100% of this extra money in cash outside the banks, what will be the long term effect of the policy on the money supply? Round your answer to the nearest integer. The money supply will increase by dollars Suppose the Canadian economy has only two commercial banks: Bank A and Bank B. The following table shows their current balance sheets in dollars. The money supply in period 1 Bank A Bank B Assets Liabilities Assets Liabilities 2,636.9 1,684.52 2,193.9 1,401.52 443 283 Deposits Loans Reserve b. Suppose that the banks cannot make additional loans because they would exceed their desire reserve ratio (both banks have he same reserve ratio). What is the reserve ratio? Express your answer in percentage rounded to the nearest first decimal. 16.8 Correct response: 16.8 C. Suppose that individuals hold 139 dollars in cash. What is the money supply? Express your answer in dollars rounded to the nearest second decimal. 4460.42 d. Suppose the Bank of Canada prints 55 dollars and distributes them among the Canadian population. If individuals do not keep money outside banks as cash, what will be the long term effect of the policy on the money supply? Use the reserve ratio that you computed in a previous question. Round your answer to the nearest integer. The money supply will increase by dollars e. Suppose the Bank of Canada prints 55 dollars and distributes them among the Canadian population. If the people keep 100% of this extra money in cash outside the banks, what will be the long term effect of the policy on the money supply? Round your answer to the nearest integer. The money supply will increase by dollars

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