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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.

Economics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter13: Money And The Banking System
Section: Chapter Questions
Problem 18CQ
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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.
Transcribed Image Text: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.
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