Question
4. Suppose the Bank of England purchases a UK government bond from you for 10,000. a.Suppose you deposit the 10,000 in First Student Bank. Show
4. Suppose the Bank of England purchases a UK government bond from you for 10,000.
a.Suppose you deposit the 10,000 in First Student Bank. Show this transaction on First Student Bank's T-account.
b.Suppose the reserve requirement is 20 percent. Show First Student Bank's T-account if they loan out as much as they can.
c.At this point, how much money has been created from the Bank of England's policy action?
d.After infinite rounds of depositing and lending, how much money could be created from the Bank of England's policy action?
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Macroeconomics
Authors: Glenn Hubbard, Anthony Patrick O'Brien, Matthew P Rafferty
1st Edition
978-0132109994, 0132109999
