$9$ Assume the reserve ratio $=20\%$ or $\frac{1}{5},$ and all the commercial banks are initially "lent up$"($i$.$e$.,$ their Excess Reserves $=0).$ DETERMINE THE FOLLOWING $($a through $f),$ if the "FED" BUYS $$1$ billion in US Government Bonds from a commercial bank, say Bank $"$A$"$ and not from a Bank $A^{\text{'}\text{'}}$ deposit customer $($Use $ amounts in all your answers$)$

a$.$ determine the change in the size of the nation's Money Supply, caused by the FED's purchase of US government bonds from Bank $"$A$"[$i$.$e$.$ the quantity of money created by the FED, when THEY purchased those bonds from Bank $"A"]=[0],$ since The FED did not create money to buy those government bonds. They created Reserve assets to pay the bank for the bonds they purchased from Bank A $($i$.$e$.,$ The Fed created Reserve assets to pay Bank A$,$ the FED did not create money, because Reserve assets are not money.

b$.$ now, determine the size of the Excess Reserves of this commercial Bank $"A"=!$

remember $ER=$ Actual Reserve minus $$ Required Reserves

c$.$ now, using answer $11$b$,$ determine the maximum amount of checking account balances $($money$)$ that this commercial, Bank $"$ tilde$(A)"$ can and will create and lend to a borrower $($either households, firms, or governments$)$; and thus, the maximum increase in the size of the nation's Money Supply that this bank $"$A$"$ will create$)=$

d$.$ Now after the borrower writes a CHECK to buy something from households, firms or governments and the receiver of the CHECK deposits the CHECK at their commercial bank not bank $"$A$",$ say, bank $"B"$ and after commercial bank $"B"$ has that check cleared, determine the size Excess Reserves of that second commercial bank, bank $"B".=$ remember $ER=$ Actual Reserve minus $$ Required Reserves

e$.$ now, using answer to question $11d,$ determine the maximum amount of checking account balances $($money$)$ that the second commercial, Bank $"$B$"$ can create and lend to a borrower $($either households, firms or governments, and thus the maximum increase in the size of the nation's money supply that this bank $"$B$"$ will create $=$

f$.$ Assuming this process continues until the last commercial bank's excess reserve $=0,$ determine the maximum amount of checking account balances $($money$)$ that will be created by all the commercial banks in the banking system combined $=$ unlimited.

$($Remember you must add up all the checking account balances $($money$)$ created by the many commercial banks in the banking system as this process continues until the last commercial bank's excess reserves approach $0)$

$10.$ Assume the reserve ratio $=20\%,$ o $""$