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Answer ALL parts a-c The following are balance sheet items for two entities: the Central Bank and A Commercial Bank. Central Bank: Discount Loans $35
Answer ALL parts a-c
The following are balance sheet items for two entities: the Central Bank and A Commercial Bank. Central Bank: Discount Loans $35 B, Currency $60 B, Government Securities $55 B, Net Worth: $10 B, and Reserves $20 B Commercial Bank: Checkable Deposits $100 B, Government Securities $80 B, Loans $50 B, Net Worth $15 B, Reserves $20 B, Borrowings (from Central Bank) $35 B The reserve requirement is 10%. In answering below be sure to clearly state any assumptions you make. a) Build a Balance Sheet for each bank. If the Central Bank calls in $10 B in discount loans, explain in words what happens to each balance sheet initially. b) Calculate the effect of the Central Bank calling in $10 B in discount loans on the money supply. c) Discuss 1 additional factor that affects the money supply (M1) besides the Federal Reserve and briefly explain how it does soStep by Step Solution
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