26. Consider the following situation in the Canadian banking system: • The Bank of Canada purchases $5 million worth of government securities from an investment dealer with a cheque drawn on the Bank of Canada. • The dealer deposits this cheque at Bank XYZ, a commercial bank. • The target reserve ratio for all commercial banks is 20%. • All commercial banks operate with no excess reserves. • There is no cash drain. Bank XYZ is immediately in a position to expand its loans by $1 million. $5 million. $25 million. $4 million. $3.75 million.

26. Consider the following situation in the Canadian banking system: • The Bank of Canada purchases $5 million worth of government securities from an investment dealer with a cheque drawn on the Bank...

26. Consider the following situation in the Canadian banking system:

•	The Bank of Canada purchases $5 million worth of government securities

from an investment dealer with a cheque drawn on the Bank of Canada.

•	The dealer deposits this cheque at Bank XYZ, a commercial bank.

•	The target reserve ratio for all commercial banks is 20%.

•	All commercial banks operate with no excess reserves.

•	There is no cash drain.

Bank XYZ is immediately in a position to expand its loans by

		$1 million.
		$5 million.
		$25 million.
		$4 million.
		$3.75 million.

Jun 09, 2022

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