If the reserve ratio is 10 percent and chartered banks have no excess reserves, the chartered banks could expand the money supply by $1 million if the Bank of Canada would:

Question

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When the Bank of Canada buys $100,000 worth of government bonds, it increases the reserves of the chartered banks by $100,000. With a reserve ratio of 10%, this allows the banks to expand the money supply by 10 times that amount, or $1 million, through the money multiplier effect.

If the Reserve Ratio Is 10 Percent and Chartered Banks