Consider the Following Situation in the Canadian Banking System: •

question 28

Multiple Choice

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 25%.
• All commercial banks operate with no excess reserves.
• There is no cash drain.
TABLE 26-4
Refer to Table 26-4.The maximum creation of new deposits by the banking system,including the dealer's original deposit at Bank XYZ,is

• A)$25 million.
• B)$22.5 million.
• C)$20 million.
• D)$15 million.
• E)$5 million.

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Definitions:

Payoff

Payoff refers to the return or reward received as a result of a particular action or decision, often used in the context of games and economic strategies.

Pure Strategy Equilibria

A solution concept in game theory where players choose a single strategy that maximizes their payoff given the strategies chosen by the other players.

Swerve

In game theory, a strategy that involves a sudden change in direction or decision, especially to avoid a negative outcome.

Chicken

a domesticated bird commonly raised for its meat and eggs; also can denote a game in which two players head towards each other, and the first to veer away is considered the loser.