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If the Fed purchases $2 million of bonds from the First National Bank (FNB) and lends the discount loan of $1 million to the FNB
If the Fed purchases $2 million of bonds from the First National Bank (FNB) and lends the discount loan of $1 million to the FNB bank and the depositors of the FNB withdraw $0.5 million and hold it as currency, what happens to the assets and liabilities of the Fed and the First National Bank and the monetary base? Use T-accounts to explain your answer.
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