Consider an open market purchase by the Fed of $3 billion of Treasury bonds. Show the impact

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Consider an open market purchase by the Fed of $3 billion of Treasury bonds.

Show the impact of the purchase on the bank from which the Fed bought the securities. Then, assuming the required reserve ratio is 10 percent, the bank does not want to hold extra reserves, and the public does not want to hold currency, compute the impact on M1.

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