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.

The Fed Assets Building 1M TBills 4M Liab. Bank X's Deposit 1M Bank Y's Deposit 1M FR notes 2M Capital 1M Bank X Assets Building 1M FRnotes 1M Reserve 1M A's Loan 1.5M Liab. A's Deposit 3M Loan from Bank Y 0.5M Capital 1M Bank Y Assets Building 1M Reserve 1M Loan to Bank X 0.5M Liab. B's Deposit 1.5M Capital 1M Person A Assets Deposit at Bank X 3M FRnotes 1M House 1.5M Liab. Loan from Bank X 1.5M Capital 4M Person B Assets Deposit at Bank Y 1.5M Liab. 0 Capital 1.5M