Assume the public holds a fixed amount of currency and the chartered banks have a desired reserve ratio of 10%.
Assuming the Bank of Canada buys $50 million in government of Canada bonds from bond brokers, provide numerical answers to each of the following questions.
[a] What is the ultimate change in the dollar size of loans caused by the action of the Bank of Canada?
[b] What is the ultimate change in the dollar size of the money supply?