Suppose in the Banking System (all numbers are in millions): Total Reserve = $72 Required Reserve Ratio = 10% of deposits Currency in circulation = $ 400 Checkable deposits = $ 600 Money Supply = $1,000 Given these initial conditions, Assume Fed sells $2 million in securities to the First National Bank. 1. Sognario What is the effect on total reserves and the monetary base? Use T-accounts for both the bank and the federal reserve to explain your answer.
Suppose in the Banking System (all numbers are in millions): Total Reserve = $72 Required Reserve Ratio = 10% of deposits Currency in circulation = $ 400 Checkable deposits = $ 600 Money Supply = $1,000 Given these initial conditions, Assume Fed sells $2 million in securities to the First National Bank. 1. Sognario What is the effect on total reserves and the monetary base? Use T-accounts for both the bank and the federal reserve to explain your answer.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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