fi Suppose that the Federal Reserve (the "Fed") buys $4 million of bonds from a bond dealer, who immediately deposits the funds in her checking account. What is the initial impact of this transaction? O The banking system's holdings of securities rise by $4 million, and the banking system's total reserves fall by $4 million. O Checkable deposits rise by $4 million, and the banking system's holdings of securities rise by $4 million. O Checkable deposits rise by $4 million, and the banking system's total reserves rise by $4 million. O The banking system's holdings of securities fall by $4 million, and the banking system's total reserves rise by $4 million. As a result of the Fed's purchase of $4 million of securities, checkable deposits in the banking system can potentially, by as much as bonge e 4. Working through an open-market operation Assume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves. Assets Liabilities and Net Worth (Billions of Dollars) Total reserves 5 Checkable deposits 50 Loans 25 Securities 20 Total 50 Total 50 What is the required reserve ratio? OOOO 25% 40% 5% 10%

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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fi
Suppose that the Federal Reserve (the "Fed") buys $4 million of bonds from a bond dealer, who immediately deposits the funds in her checking
account. What is the initial impact of this transaction?
O The banking system's holdings of securities rise by $4 million, and the banking system's total reserves fall by $4 million.
O Checkable deposits rise by $4 million, and the banking system's holdings of securities rise by $4 million.
O Checkable deposits rise by $4 million, and the banking system's total reserves rise by $4 million.
O The banking system's holdings of securities fall by $4 million, and the banking system's total reserves rise by $4 million.
As a result of the Fed's purchase of $4 million of securities, checkable deposits in the banking system can potentially,
by as much as
bonge
Transcribed Image Text:fi Suppose that the Federal Reserve (the "Fed") buys $4 million of bonds from a bond dealer, who immediately deposits the funds in her checking account. What is the initial impact of this transaction? O The banking system's holdings of securities rise by $4 million, and the banking system's total reserves fall by $4 million. O Checkable deposits rise by $4 million, and the banking system's holdings of securities rise by $4 million. O Checkable deposits rise by $4 million, and the banking system's total reserves rise by $4 million. O The banking system's holdings of securities fall by $4 million, and the banking system's total reserves rise by $4 million. As a result of the Fed's purchase of $4 million of securities, checkable deposits in the banking system can potentially, by as much as bonge
e
4. Working through an open-market operation
Assume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves.
Assets
Liabilities and Net Worth
(Billions of Dollars)
Total reserves
5
Checkable deposits
50
Loans
25
Securities
20
Total
50
Total
50
What is the required reserve ratio?
OOOO
25%
40%
5%
10%
Transcribed Image Text:e 4. Working through an open-market operation Assume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves. Assets Liabilities and Net Worth (Billions of Dollars) Total reserves 5 Checkable deposits 50 Loans 25 Securities 20 Total 50 Total 50 What is the required reserve ratio? OOOO 25% 40% 5% 10%
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