Answer Q4 and 5

4. Indicate the effect of each of the following changes on and-= decrease). Increase in Federal Reserve Notes Outstanding Decrease in foreign deposits Increase in Treasury cash holdings Decrease in primary credit Decrease in Treasury bills Increase in agency securities Increase reverse repos Increase in secondary credit Increase in Treasury deposits Suppose the Federal Reserve instructs the Trading Desk to purchase $1 billion of securities. Show the result of this transaction on the balance sheets of the Federal Reserve System and commercial banks. What happens to the liquidity of the banking system? 5