6. Effects of an open-market transaction on the balance sheets of banks and the fed (in millions of dollars). Briefly discuss your results.

Banks		Federal Reserve System
Assets	Liab.	Assets	Liab.
Reserves +$10	0	U.S. Govt	Bank Reserves
U.S. Govt		Sec. +$10	+$10
Securities $10	0

1. What is the transaction in Government securities the Federal Reserve System has done looking at the table?

2. If the required reserve ratio is 10 percent, what will happen to the money supply? (Hint Money multiplier) The money supply will increase or decrease and by how much? Why