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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.

Exploring Economics
Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter25: Money, Banking, And The Federal Reserve System
Section: Chapter Questions
Problem 13P
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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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