10) Unless otherwise noted, the following assumptions are applied: the required reserve ratio on checkable deposits is [0%, banks do not hold any excess reserves,
10) Unless otherwise noted, the following assumptions are applied: the required reserve ratio on checkable deposits is [0%, banks do not hold any excess reserves, and the public's holdings of currency do not change. a} Ifthe Fed sells $2 million of bonds to the First National Bank, what happens to reserves and the monetary base? Use T-aceounts to explain your answer. b) Using T-accounts. show what happens to checkable deposits in the banking system when the Fed lends $1 million to the First National Bank. Page 2 of 3 c) Suppose that currency in circulation is $600 billion, the amount ofcheckable deposits is $900 billion. and excess reserves are $15 billion. Use 5% as required reserve ratio. Calculate the money supply' the currency deposit ratio, the excess reserve ratio, and the money multiplier
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