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ency. 8 169。 2023 Pearson Education Canada Inc. Open Market Sale in the FX Market MB = C + R Open Market Sale of FX to a bank The Banking System The Bank of Canada Assets Liabilities Assets Liabilities FX + $100 FX $100 Reserves $100 Reserves $100 Open Market Sale of FX to the Public Public The Bank of Canada Assets Liabilities Assets Liabilities FX + $100 FX $100 Reserves $100 Deposits $100 Banking System Assets Liabilities Reserves Chequable Deposits $100 $100 Result: R ? $100, MB ? $100 9 169。 2023 Pearson Education Canada Inc. Shifts from Deposits into Currency Even if the Bank of Canada does not conduct open market operations, a shift from deposits into currency will affect R. However, such a shift will have no effect on MB. Shifts From Deposits into Currency: Public The Bank of Canada Assets Liabilities Assets Liabilities Deposits – $100 Currency + $100 Currency + $100 Reserves – $100 Banking System Assets Liabilities Reserves – $100 Deposits – $100 Result: R ? $100, MB unchanged 10 169。 2023 Pearson Education Canada Inc. Advances Banking System The Bank of Canada Assets Liabilities Assets Liabilities Reserves Advances Advances Reserves + $100 + $100 + $100 + $100 Result: R ? $100, MB ? $100 Conclusion: Bank of Canada has better ability to control MB than R 11 169。 2023 Pearson Education Canada Inc. Deposit Creation: Single Bank Consider a $100 open market purchase from First Bank First Bank Assets Liabilities Securities – $100 Reserves + $100 First Bank Assets Liabilities Securities – $100 Deposits + $100 Reserves + $100 Loans + $100 12 169。 2023 Pearson Education Canad