Bank X Bank Y Central Bank Liabilitie Assets S Liabilitie Liabilitie Consumer A Liabilitie Assets S Consumer B Liabilitie Assets S Assets Assets S S Bank X's Deposit IM Building IM Building IM A's Deposit 3M Building IM Bank Y's Deposit IM Deposit at Bank X 3M TBills 4M FR notes IM B's Deposit 1.5M Reserve IM 0 Loan from Bank X 1.5M Deposit at Bank Y 1.5M Loan from Bank Y 0.5M FR Notes 2M FR notes IM Loan to Reserve IM Bank X 0.5M House 1.5M A's Loan 1.5M Capital Capital Capital Capital IM Capital 1.5M IM IM 4M (1) In Topic 2 lecture note Money creation and control 8, suppose that the transaction changes to the following: the Fed. decides to reduce money supply by selling $0.5 M TBills to each of Bank X and Bank Y. Bank X uses currency to purchase TBills while Bank Y uses its reserve at the Fed to purchase TBills. Fill out the balance sheets after transactions and calculate MO and M1.(11%) Central Bank Liabilitie Assets S Bank One Liabilitie Assets Bank Two Liabilitie Assets s Consumer A Liabilitie Assets Consumer B Liabilitie Assets S s s Capital Capital Capital Capital Capital (2) After Money Creation and Control 9 in the slide, if the Fed. purchases $0.25M Tbills from each of two banks in order to increase money supply. The Fed. credit Bank X and Bank Y's reserve accounts to execute this transaction. Fill out the balance sheets and calculate MO and M1. (11%) Consumer A Central Bank Liabilitie Assets S Bank One Liabilitie Assets S Bank Two Liabilitie Assets Consumer B Liabilitie Assets S Assets Liabilities S Capital Capital Capital Capital Capital (3) Following the previous step, Bank Y provides $1M loan to Consumer B. Fill out the balance sheets and calculate MO and Mi. (11%) Central Bank Liabilitie Assets Bank One Liabilitie Assets Bank Two Liabilitie Assets S Consumer A Liabilitie Assets S Consumer B Liabilitie Assets S S S Capital Capital Capital Capital Capital Bank X Bank Y Central Bank Liabilitie Assets S Liabilitie Liabilitie Consumer A Liabilitie Assets S Consumer B Liabilitie Assets S Assets Assets S S Bank X's Deposit IM Building IM Building IM A's Deposit 3M Building IM Bank Y's Deposit IM Deposit at Bank X 3M TBills 4M FR notes IM B's Deposit 1.5M Reserve IM 0 Loan from Bank X 1.5M Deposit at Bank Y 1.5M Loan from Bank Y 0.5M FR Notes 2M FR notes IM Loan to Reserve IM Bank X 0.5M House 1.5M A's Loan 1.5M Capital Capital Capital Capital IM Capital 1.5M IM IM 4M (1) In Topic 2 lecture note Money creation and control 8, suppose that the transaction changes to the following: the Fed. decides to reduce money supply by selling $0.5 M TBills to each of Bank X and Bank Y. Bank X uses currency to purchase TBills while Bank Y uses its reserve at the Fed to purchase TBills. Fill out the balance sheets after transactions and calculate MO and M1.(11%) Central Bank Liabilitie Assets S Bank One Liabilitie Assets Bank Two Liabilitie Assets s Consumer A Liabilitie Assets Consumer B Liabilitie Assets S s s Capital Capital Capital Capital Capital (2) After Money Creation and Control 9 in the slide, if the Fed. purchases $0.25M Tbills from each of two banks in order to increase money supply. The Fed. credit Bank X and Bank Y's reserve accounts to execute this transaction. Fill out the balance sheets and calculate MO and M1. (11%) Consumer A Central Bank Liabilitie Assets S Bank One Liabilitie Assets S Bank Two Liabilitie Assets Consumer B Liabilitie Assets S Assets Liabilities S Capital Capital Capital Capital Capital (3) Following the previous step, Bank Y provides $1M loan to Consumer B. Fill out the balance sheets and calculate MO and Mi. (11%) Central Bank Liabilitie Assets Bank One Liabilitie Assets Bank Two Liabilitie Assets S Consumer A Liabilitie Assets S Consumer B Liabilitie Assets S S S Capital Capital Capital Capital Capital
