Problems
- For each of the following transactions, what is the initial effect (increase or decrease) on M1? On M2?
Question
I8GmJ5O74183kS8sXq9GCUrUOLKv2FifseV6eT/1pVyO6nNg2NjNVY4bMl8mSpmtvvSeowXVz1N8xg9kKilB2CCQoiuC79+NhT1SaNg9oGzCXZf1i03XVzV+MIC1QR4KProb 16 1a. You sell a few shares of stock and put the proceeds into your savings account.Question
Ljs8Y0EJUOPUrMSy0ODx/qU4EECEHXIpzWVMgdLTzYMSfmQjTydLsOB2bGrG45W2fgR6s7zHcSeLjXMqQD8qwKotG1sMWpNRFGhncIkGe+u13zcDxtzgYM3VsEm5Ami4Prob 16 1b. You sell a few shares of stock and put the proceeds into your checking account.Question
8YMNh3drgfFpXc2J5hNF8YQSPIKT8Rt8fv3kwGVy4MEOaYRc3Js3UQdXN67yBoWwhdnFCd70aPuuMzoiJq8XG+Sj27ycJ9923P0jxS8Dnc0USjplvC1EyA==Prob 16 1c. You transfer money from your savings account to your checking account.Question
Auhf7WAl/kP761Zf1WBmVxwErS+ForFYRyfO4qRpwMdobDYVuaUevQthxkDSNeZ2XCi5kSMQSJIixGvf/AJ7gU8KWr8UjVTdgDsEraEVXCXibsg/+AcsAhvev4lGcruS++N6YSTnoFvD+sC+Prob 16 1d. You discover $0.25 under the floor mat in your car and deposit it in your checking account.Question
DSRroOUTITe7FFrzXIQFQGPqXClxvY3b65Cm+79MbszVPFLOHd3XPFD8/4SU2G2/w4DmPwjteQkufu7EmLTfMrgUoJiLGFi10XLPtAMDBEm0kS1xIqEdutvBKihaB00To3WoPizOxReDDia7Prob 16 1e. You discover $0.25 under the floor mat in your car and deposit it in your savings account.
- There are three types of money: commodity money, commodity-backed money, and fiat money. Which type of money is used in each of the following situations?
Question
ZQXPOuOuApB7fTukWHo+5N2J/+W2cXj80QWTMviwn3spM5XwMx0DnyqEXF86lUN73K1foAX6fH2Betvk6+MDHlBLC9XkguObvhgzP4SV56E=Prob 16 2a. Bottles of rum were used to pay for goods in colonial Australia.Question
OmlSBZr+s3UCd8lQJ5dEQjWAUTqXzGXxQ7IklYTmLTHTf96DJmrumGSmF7wybCvRVQBzC7H9k+QmZXKP3WUUs1Cxeo7KFQHfd8vuXQLKQP9AZQIjProb 16 2b. Salt was used in many European countries as a medium of exchange.Question
/LdQwzo0IM/Bo0R6d6eQpmCvqH2wSMoVogVuxa4oNEsyg4ToLtOxZiNrrPZXZz+Nr11WL2bzvgFyd7IEWZIehpzz6XJ1dPpqRuGASEtsZTTqHnYTmtSAGyzvWCt4KY7e3KOwnGq+cMEFov9ka8WNSxisaQwhIYcsvPNAbfjZnYJxQHU3Yfe5T/ZcdiognELBcvBQDg==Prob 16 2c. For a brief time, Germany used paper money (the “Rye Mark”) that could be redeemed for a certain amount of rye, a type of grain.Question
TUiFsvVhxd703J0QBCjLMn/6QEtTjbkIngJraODWZlGqoEmlXgyrttDHZCKcKdiEUN/2SAHdnqiC1evYy+Um7TlxmCHEQ9CTs2LtDyl/HvvuBiGbH+ynKXlfL4vul0zBeA/x25cQs8rQXrAx7PCkDeA2iPl6cNFpwpxQ1Q2FYN3IUUiGaA4XKcw12WP8YZTyProb 16 2d. The town of Ithaca, New York, prints its own currency, the Ithaca HOURS, which can be used to purchase local goods and services.
Question
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Year Currency in circulation Traveler’s checks Checkable deposits Savings deposits Time deposits Money market funds M1 M2 Currency in circulation as a percentage of M1 Currency in circulation as a percentage of M2 2000 $531.2 $8.3 $547.7 $1,878.0 $1,046.0 $902.0 ? ? ? ? 2001 581.1 8.0 592.9 2,309.5 974.5 962.5 ? ? ? ? 2002 626.2 7.8 585.7 2,773.4 894.5 887.5 ? ? ? ? 2003 662.5 7.7 636.2 3,162.8 817.8 777.0 ? ? ? ? 2004 697.7 7.6 671.1 3,508.8 827.9 694.7 ? ? ? ? 2005 724.1 7.2 643.5 3,606.0 993.1 699.4 ? ? ? ? 2006 749.6 6.7 610.0 3,694.6 1,205.3 799.0 ? ? ? ? 2007 759.7 6.3 607.6 3,872.6 1,275.0 972.7 ? ? ? ? 2008 815.0 5.5 782.1 4,106.1 1,455.7 1,080.5 ? ? ? ? 2009 861.5 5.1 827.0 4,836.9 1,177.4 820.8 ? ? ? ? 2010 915.7 4.7 911.7 5,357.6 926.6 700.0 ? ? ? ? Prob 16 3. The table below shows the components of M1 and M2 in billions of dollars for the month of December in the years 2000 to 2010 as published in the 2011 Economic Report of the President. Complete the table by calculating M1, M2, currency in circulation as a percentage of M1, and currency in circulation as a percentage of M2. What trends or patterns about M1, M2, currency in circulation as a percentage of M1, and currency in circulation as a percentage of M2 do you see? What might account for these trends?- Indicate whether each of the following is part of M1, M2, or neither:
Question
COmfE2QXI8H6nn2x7UOrN6u6TOX/ascFmmOXXy9CNI4Z241yV6kP99l7iO4=Prob 16 4a. $95 on your campus meal cardQuestion
bSHZ9ZHiA2ODzYPgEqJI1idkpYatb6bb7uprP7aGmUBwlhVEJa1i4+gzItVbpLYNNnKzHw==Prob 16 4b. $0.55 in the change cup of your carQuestion
ERT7AHY/oJ23OQxjY+2Iv43ubW9felMwpgFxG1h50HEty/um8Y6BetB7BskLnc45Prob 16 4c. $1,663 in your savings accountQuestion
HnhaZvTBfzMmlJ/GxOJzDjZsaMiUsjDOh0Dluz9JALd0vc+HsPFNtUyXRDDmOlGpProb 16 4d. $459 in your checking accountQuestion
dPXVLmrRpJEemKoeMOI/tpRmH5yMZH3ccmeGQShKCFCZ+A/qTLUlbUn9DiGAv5TWProb 16 4e. 100 shares of stock worth $4,000Question
iYHmaMFinezTxzftEqB7LuQRJcKVJyzsXUnxylJQI/N+kKKkquPZcNUhSEDbIJ+HYmnEUL32l9KnODPsVONAfRl1ytE=Prob 16 4f. A $1,000 line of credit on your Sears credit card
- Tracy Williams deposits $500 that was in her sock drawer into a checking account at the local bank.
Question
yTt/hSq74ELzUd8b50d+lj/08Pl/TT8Gytc2enzaB0pwl5RScqxIWoWDD5SKrfzQW5Z3y1KEdb66g7Qvuk4T9zWETZslReWNyH4Dkd3JCHQjyib7oZOvDrqHA/T8iQNRVMUsOd+XWmnSWPl5ILtAnc6hKDKJ2DQpp5MNdg==Prob 16 5a. How does the deposit initially change the T-account of the local bank? How does it change the money supply?Question
d0XtqO+knYDwalLBuzthJ6UsyVvONS95tjC2Aui/W4h9BdCSMwsEuAqeBKm6MeEkf9/ZtrpkNeE3UJvt+j693wRgAiIE+lzrDYUJF3DV6d7PXSPNaHEEEMGKF9de6r7wfZYA2MrQrpU=Prob 16 5b.If the bank maintains a reserve ratio of 10%, how will it respond to the new deposit?Question
Q+PpOrLmksDnLLfTqbb55dxBHac7OD1i/b6qFmb+0LB5QB5r38LqSCsWcp0ldYAqV8sxUx3Mo3cl1qhFv8YpKEAkz14cx+kf32EduaVYI+XsnGDDFSqQbWjmC+aPBqk9GZNfjRVGVLhCmAcVTafiQeGR6bdp3Q0ivlooRYnI6zAxW3PWv2PvMOdUd97qHWX36X45DsMB41M2pp5HrOaBhbqhRUkuYkcfE4dHSeSXA9VVhykTC/r2UXNxM4g1/vgT00ZV4gZuzTJnMG7tG3p8XQtwirzaoeGvxiJZBJFVhsO+1We693lGZ4muqE3+tJDJCIhY8BHGS3ujsfh0Yd/DB6t4InozuPTEBgK3InbLGFA=Prob 16 5c. If every time the bank makes a loan, the loan results in a new checkable bank deposit in a different bank equal to the amount of the loan, by how much could the total money supply in the economy expand in response to Tracy’s initial cash deposit of $500?Question
xt+U40SqhKMmbk70to3hbVGr3xREVGXl8ajS5oEIxxHm7tSJTYulx3ZEW2nxjY1LckPe+cMireWvm9nGM+O/aL+t8jqw0ANsN4fZjgr/kb/GR1komiI4gRCi6uP/rBlNS2R3IxMNs8daz0DP0lC4MRq7L2L3zWt9zE/a7UGXbOM6MAfqGXGcKE3URqFmlBNx+X2hvAGEvwsbfnYHkPNWLFBXwgCz+GBjZg1BLrzUdNRbn+LUWk0UaduQZVh0ZqXRH6ynLCDDuyzGxnsfrQSP2U3Ptk59S60EAy0YIyiDf9ZTabq5YNr3kraohAdSFe/wW48cK25pN8bBLP2Q2hpb7Uui7rqa4nJ0EJtif5Em6pw/Sb6kamaj3PS71XNpTfgy8yCxS0o0XG4=Prob 16 5d. If every time the bank makes a loan, the loan results in a new checkable bank deposit in a different bank equal to the amount of the loan and the bank maintains a reserve ratio of 5%, by how much could the money supply expand in response to Tracy’s initial cash deposit of $500?
- Ryan Cozzens withdraws $400 from his checking account at the local bank and keeps it in his wallet.
Question
NevQMuF8mWeMMdHu1hLFb8BBcWlTTiuR2qIsol0NVLDy2hlVYlo6cQ+yuzLKiK8sOsnz42d28fKHPqV2hOR3kXPodkMYYnQCEeZ6XYOOs9PYEDvLI5RPwfu2qntTfdKH+t944w==Prob 16 6a. How will the withdrawal change the T-account of the local bank and the money supply?Question
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Prob 16 6b. If the bank maintains a reserve ratio of 10%, how will it respond to the withdrawal? Assume that the bank responds to insufficient reserves by reducing the amount of deposits it holds until its level of reserves satisfies its required reserve ratio. The bank reduces its deposits by calling in some of its loans, forcing borrowers to pay back these loans by taking cash from their checking deposits (at the same bank) to make repayment.Question
G+m9HkGCfb6el9BrmTo81i68mU0HsWnUCM9+DXLdotgkkRLDjcuMWHZ/LN04kMKjGn9peFMpPTTk/gy0cSwDLiwZqJeahfS50guiRD7DNnU2ZmDr78ntMKJ5ibAljtjMbWC0mk+nU2jW5jzvMpRo28pdGCCSn4ZYH5F+FhH13NqoYe4BpdQPnCAlm/TtYLWyaWlh5AprH0wLz7aQu7TjSfC5S112t62+5aN3bRD+VyAtAc7i2rwef+m9vhpoVkHTJ7EuLjUoecVQRpOLJE4K9lCqppqY855GH0oJWA==Prob 16 6c. If every time the bank decreases its loans, checkable bank deposits fall by the amount of the loan, by how much will the money supply in the economy contract in response to Ryan’s withdrawal of $400?Question
h4xcMTu77f7DoBIeYHKMslmLCNtO6XAfV9KLgFCZZ9eSCNTSqODueLxHSEPtjwpE0aoKi0UdcDkIHVQ0sz+izhtKBmxFGqBB1P/DWvIJVDnknESn/Uu8H9EwUXFSP7s1shq4K8MhznREztle9LRw7v/fPt/rak0yVlTOstpvAvZxZnZ1TBtOAPywTEzX9U9NooT3RFA3CepIFy2SJoR4gjwDFKsVwBhqzHpdX0XWyJdDmaGuu40EoSOHYTf5sLuf6E3XaqQXEv84cpYAZlKPfUpDMlWV+n3XyL4A4M8w1SaT62c4dS9eXv2YRTYbNpUbIBUSDw==Prob 16 6d. If every time the bank decreases its loans, checkable bank deposits fall by the amount of the loan and the bank maintains a reserve ratio of 20%, by how much will the money supply contract in response to a withdrawal of $400?
- The government of Eastlandia uses measures of monetary aggregates similar to those used by the United States, and the central bank of Eastlandia imposes a required reserve ratio of 10%. Given the following information, answer the questions below.
Bank deposits at the central bank = $200 million
Currency held by public = $150 million
Currency in bank vaults = $100 million
Checkable bank deposits = $500 million
Traveler’s checks = $10 millionQuestion
+Pkg6RtwR4Iw81CnxJEOjRmD8bJAOPkfBnlwBg==Prob 16 7a. What is M1?Question
X06Ky0a7+iSOELobP5iTU7tM0DL7pt6Zw2RHFmVPzuAyTQaR2CVoywuXyZ8=Prob 16 7b. What is the monetary base?Question
+Qq1xY+KqiZuqtV22eDjXw3WPRF8F/og/v5PjGiIwxY8W8SH3ZijFFXfqvUU1UZXK53+/HboLaVb8gQFVVpEjPE7VTY=Prob 16 7c. Are the commercial banks holding excess reserves?Question
6HkPAyr03MBDkfAJ8o/4dfNFCgRD18Pd+VPnP6+7lHLpFpj4XTL2FTqCqOWyZEPflL/Ge0dSk5EGMkbsQnnW5hSobWi/vxBukiizUSm2uWO/nQ3C9Piqw1ymDoGBA0sCy6+rmAMJDaNmOfQrLNUkQDEd1QkdbtdP4yd8RwgwhiBHcFF4Prob 16 7d. Can the commercial banks increase checkable bank deposits? If yes, by how much can checkable bank deposits increase?
Question
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Round Deposits Required reserves Excess reserves Loans Held as currency 1 $500.00 $100.00 $400.00 $400.00 $200.00 2 200.00 ? ? ? ? 3 ? ? ? ? ? 4 ? ? ? ? ? 5 ? ? ? ? ? 6 ? ? ? ? ? 7 ? ? ? ? ? 8 ? ? ? ? ? 9 ? ? ? ? ? Total after 10 rounds ? ? ? ? ? Prob 16 8. In Westlandia, the public holds 50% of M1 in the form of currency, and the required reserve ratio is 20%. Estimate how much the money supply will increase in response to a new cash deposit of $500 by completing the accompanying table. (Hint: The first row shows that the bank must hold $100 in minimum reserves—20% of the $500 deposit—against this deposit, leaving $400 in excess reserves that can be loaned out. However, since the public wants to hold 50% of the loan in currency, only $400 × 0.5 = $200 of the loan will be deposited in round 2 from the loan granted in round 1.) How does your answer compare to an economy in which the total amount of the loan is deposited in the banking system and the public doesn’t hold any of the loan in currency? What does this imply about the relationship between the public’s desire for holding currency and the money multiplier?- What will happen to the money supply under the following circumstances in a checkable-deposits-only system?
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AjmcvgMqiJCKdS9vQn18BwwOXfvQJl+P8e4eytkNp6aPNixuqBRdSppnP5iW7l4vK2dINeNAj8WYWugnYqjaq+zHEj3SkS53ks6nC0TvuQIKYVr3T/B8TAirm7hKsGmsyQs54Dw6JAh+qI+t9ir1MSLN2D4=Prob 16 9a. The required reserve ratio is 25%, and a depositor withdraws $700 from his checkable bank deposit.Question
OErKcS8IyzltdgPjmQDJMxy7047m4zz7hDGNlW+f3KFHGEUjAgQjs3ryEmIsFjsHzLiPHBOzprZ5XuIxaNUzxhEjDDkLl6QNUWETGCz4HvnZ9KBWvsgC730RTkMCLEIwmfxh/OJW3fXAv1Em3BZ/AGL+2Yc=Prob 16 9b. The required reserve ratio is 5%, and a depositor withdraws $700 from his checkable bank deposit.Question
gVMqP3sAkodBJmLOXUsBCa6S1oAtTIW0VyjfFKU6vZEMGJ5OYUKZGWNQbUAhplS0oyV0qbwVCJ921gmSf3GaNiyW3OlChUyWP49U8CQZwj3y8TdYe09xrTThfPIs2Ol9mS8X5Hgz1ukrWlia3svdJA==Prob 16 9c. The required reserve ratio is 20%, and a customer deposits $750 to her checkable bank deposit.Question
c1j9gQIWy3WfMW0P3T4i7/a+4FvWGlFdeI5GPkUz0U6p6cz7CUp68yFT/Qz61AYYWCbEnCNd0ut6hrIEaPh3BPrPQbXQyoYac7FXRNlGDT610E9D8RF9mNxMhVNcR1IK7eNBB/7QGfiy+zB9Vo5ucg==Prob 16 9d. The required reserve ratio is 10%, and a customer deposits $600 to her checkable bank deposit.
- Although the U.S. Federal Reserve doesn’t use changes in reserve requirements to manage the money supply, the central bank of Albernia does. The commercial banks of Albernia have $100 million in reserves and $1,000 million in checkable deposits; the initial required reserve ratio is 10%. The commercial banks follow a policy of holding no excess reserves. The public holds no currency, only checkable deposits in the banking system.
Question
Ef74HnW9fcuGwGNRomyRQT7egjIhvBB+QWzeG91yI5PdzfG4Ssj61OSxllVz6wtGuyRHBYfcH7hNcse2W/kvfC86UYcGSO/jxlzukI/+YydqdmEdyL7b+00WSM8=Prob 16 10a. How will the money supply change if the required reserve ratio falls to 5%?Question
ceg+fscPWnh7h9mUoRmmriPZWT1NBqzh1bljpAdTWpfuuwuUJqBCSQJDFZ0oxpqZ0s16egUnhimQKYAQZyC1WtOlAq3Oab8gknBCoZjR8kXX7UN1616ufE3iXXQ=Prob 16 10b. How will the money supply change if the required reserve ratio rises to 25%?
Question
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Prob 16 11. Using Figure 16-6, find the Federal Reserve district in which you live. Go to http://www.federalreserve.gov/bios/pres.htm and click on your district to identify the president of the Federal Reserve Bank in your district. Go to http://www.federalreserve.gov/fomc/ and determine if the president of the regional Federal Reserve bank in your district is currently a voting member of the Federal Open Market Committee (FOMC).- The Congressional Research Service estimates that at least $45 million of counterfeit U.S. $100 notes produced by the North Korean government are in circulation.
Question
+eaefpplxPYTQYaPUh+/UeK4U+yLffcsAWHHaGd8FHunkfWAk+DB1QM7qVWPLMFi4DylhDIy3kh3DYBkJFKTiiM28gQWo5MLc9rstwwc4T/K6xDEadpZmg==Prob 16 12a. Why do U.S. taxpayers lose because of North Korea’s counterfeiting?Question
wfausF6lIoBvpxFWDINZOi2k20xgfFdF3np8wcanNR0xB0nudsxg4GqwMn3n+cNNbl0GEQtwuiPysXoG/xjPkfwm4bRAb+4lrtqjBqJqhg582imagVaFgPUMLcyxpASiomJjX3/DbkUz4nP1WArHdBklg4ZZ/XJVA1HrY6KwU7/oYm6zn8jFfZCvLgj2cHv2vgSXRAcQMEURd+284bDWvlzRU6kX0P8vxSk56Dr36P93P/gWru2ueGLwOjru2oLiLpwpspJPXTZ8v48fJxuAiUfXdYf0ouT85YbrtuT/8zN5DTjgpKwuqvSp8B1wsUOh7hUaiCkZYUI=Prob 16 12b. As of November 2012, the interest rate earned on one-year U.S. Treasury bills was 0.18%. At a 0.18% rate of interest, what is the amount of money U.S. taxpayers are losing per year because of these $45 million in counterfeit notes?
516
- As shown in Figure 16-9, the portion of the Federal Reserve’s assets made up of U.S. Treasury bills has declined since 2007. Go to www.federalreserve.gov. Under “Select Statistical Releases,” click on “All Statistical Releases.” Under the heading “Money Stock and Reserve Balances,” click on “Factors Affecting Reserve Balances.” Click on the date of the current release.
Question
/WpWLmdKYEyS+WrVl99TJltYiTa0YvABs8qp98PVhVJ/SOO6YPR4gT0Xffa/rhgSe9+i+eFgvRM0Y0fcbjsLrlsXz+tA9citMEZY9tH1Sm2GXojAzb/qz4FEHkyCTz2ZUy050JtLlJ1dM/OHuadEMl1Bn9cNrzEmZcJb89KgHljpBJKcAdlwlMz4BNgsiWjcK6EgaIM54M28qm1X7qufgGhU2vPrVLeV2yoBA6S+Bd9jEkOCZoSjRmewJ0IosyKI0/HasgjrNa7F2c8K9dzzsD3UHyBehQEB1nqZA56vP3rgqS1+H04jbRCCgAtG2Nj1b2oxh4jiyC8ZnQIqHpIXHJ1qfD6emsecSiZSjcXPrIpLHx50u16/UAmVf4gIZVFCkqiE/J2V6Ly5npU2chbZjIl6HYGSv8JJqAqlinbUw+hPO17QtB8Oz3kXloEwhF9s/TUt8g==Prob 16 13a. Under “Statement of Condition of Each Federal Reserve Bank,” look in the “Total” column. What is the amount displayed next to “Total assets”? What is the amount displayed next to “U.S. Treasury securities”? What percentage of the Federal Reserve’s total assets are currently made up of U.S. Treasury bills?Question
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 16 13b. Do the Federal Reserve’s assets consist primarily of U.S. Treasury securities, as they did in January 2007, the beginning of the graph in Figure 16-9, or does the Fed still own a large number of other assets, as it did in mid-2011, the end of the graph in Figure 16-9?
- The accompanying figure shows new U.S. housing starts, in thousands of units per month, between January 1980 and August 2011. The graph shows a large drop in new housing starts in 1984–1991 and 2006–2009. New housing starts are related to the availability of mortgages.
Question
xZ36gePKKj8Q+DNdDJeryucprNS9/b8ntwUyEcn9Q3D8V7RFu5R7PouL0l2TgH7zBeDSeudBA3o4pBXRgkGX29bqDavwDdeiUFDUwQ==Prob 16 14a. What caused the drop in new housing starts in 1984–1991?Question
+7go/zenAYcCSYZW2JTrlUkpORYHM4alJpKBRVUCHhogwrWqcFNXOlLRGhlbCNG6kqzkMnYnETdBVxBsgrWN7pxZS1AiU9FbVFklPg==Prob 16 14b. What caused the drop in new housing starts in 2006–2009?Question
77xxD2RvutUcVrJTHs/BQleTm77hnbRneKq1cv0p5dfikzXWzN1dqIPVI0CpMOCHZ5gSqn1+RvEr1CyH1tkxbUsHPoIb9AHufFXKD2ZDRau931A28Lk3mdAuxEHo7673wr8kJvgyJY+s+m12Prob 16 14c. How could better regulation of financial institutions have prevented these two instances?
Source: Federal Reserve Bank of St. Louis.
Extend Your Understanding
Question
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Prob 16 15. Show the changes to the T-accounts for the Federal Reserve and for commercial banks when the Federal Reserve buys $50 million in U.S. Treasury bills. If the public holds a fixed amount of currency (so that all loans create an equal amount of deposits in the banking system), the minimum reserve ratio is 10%, and banks hold no excess reserves, by how much will deposits in the commercial banks change? By how much will the money supply change? Show the final changes to the T-account for commercial banks when the money supply changes by this amount.Question
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Prob 16 16. Show the changes to the T-accounts for the Federal Reserve and for commercial banks when the Federal Reserve sells $30 million in U.S. Treasury bills. If the public holds a fixed amount of currency (so that all new loans create an equal amount of checkable bank deposits in the banking system) and the minimum reserve ratio is 5%, by how much will checkable bank deposits in the commercial banks change? By how much will the money supply change? Show the final changes to the T-account for the commercial banks when the money supply changes by this amount.