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In Central Banks lecture note Money creation and control 4, suppose that the transaction changes to the following: the Fed. decides to reduce money supply
In Central Banks lecture note Money creation and control 4, 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 FRnotes to purchase TBills while Bank Y uses its reserve at the Fed to purchase TBills. Fill out the balance sheets after transactions (note: the initial balance sheet is before Money creation and control 4, slide 30, which is also provided below) and calculate M0 and M1.
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