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Assume that no banks hold excess reserves and the public holds no currency (which implies that ER = C = 0). If a bank sells
Assume that no banks hold excess reserves and the public holds no currency (which implies that ER = C = 0). If a bank sells a $100,000 security to the FED, explain what happens to this bank (Bank A) and two additional steps (or two additional banks, Bank B and Bank C) in the deposit expansion process assuming a 10% reserve requirement.Put differently, what will be the change in deposits for the first bank (DA), the second bank (DB), and the third bank (DC)?
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