The Canadian Economy is experiencing a "Recession", the Bank of Canada wants to increase the Money Supply to drive the economy out of the recession. The Traditional Monetary Policy calls for Open Market Operations to facilitate the creation of money in the banking system.

Currently in the Canadian Banking System holds:

1. Total Demand Deposits held by the Chartered Banks is $500 billion
2. Total Reserves are $110 billion; with 20% held in their vaults & 80% held at the Bank of Canada as Chartered Bank's Deposits. 
3. Chartered Banks have a Total of $140 billion in loans extended to their customers
4. Chartered Banks have a Total of $250 billion in Federal Government Securities. 
5. Assume the Chartered Banks currently have no excess reserves.
6. The Canadian Public holds $150 billion in currency which is made up of notes outside of the Chartered Banks.
7. Assume no coins are in circulation.

USE THE SPACE PROVIDED BELOW TO ANSWER THIS QUESTION. 

Instruction on how to earn "FULL MARKS" for showing your work: 1) Using the correct formula, put the correct values into the formula; & 2) State the correct calculated answer.

1. Calculate the desired reserve ratio. (Show your work) (1.25 Mark)

2. Calculate the currency drain ratio. (Show your work) (1.25 Mark)

3. Calculate the money multiplier. (Show your work) (1 Mark)

4.  To increase the money supply should the Bank of Canada buy or sell securities to the Chartered Banks via OMO? (Half a Mark)

5. Using your answer in Question 4, If the Bank of changed the Reserves of Chartered Banks by $1,000,000 correction, then through the ,money creation process the Canadian Banking System could change the Money Supply by the amount of _____________? Show your work. (1 Mark)