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11. Again, assume the same initial conditions of question 8, but now the "FED" SELLS \$1 billion in US Government Bonds to Bank " A and not a Bank " A deposit customer. Using this new information determine the following {11a11f} a. The change in the size of the nation's moncy supply (i.e. the quantity of money held by households, business firm and governments) caused by the FED's sale of US Gov't bonds to Bank " A" alone [i.e. the quantify of moncy destroyed by the FED when it sold those bonds to Bank "A"?(remember Bank " A " is paying the FED for these US Government bonds with its reserves assets, b. The size of Excess Reserves of Bank "A" after FED sells \$1 billion in US Government bonds to Bank A = (hint Bank " A has to pay the "FED" $1 billion worth of Reserve Assets for those US Government bonds) c. Using the answer to 11b, determine the minimum quartity of money that Bank " An will to destroy, as Bank "A", sells interest earning assets to households, firms or governments that have a checking account balances at a different bank , say Bank "B" in an effort to get reserve assets from that bank (these buyers will write checks to Bank "A" to pay for the interest earning assets) = d. After Bank "A" sells the interest eaming assets to a these buyers and sends the buyers' checks to the "clearing house" be cleared and the check clears, determine the size of the Excess Reserves of the buyers" bank, say bank "B" " n. (Hint Bank "B" will lose \$lbillion worth of reserve assets to Bank "A" after the check clears) e. Using the answer to question 11d, determine the minimam quantity of money Bank "B" has to destroy, (i.e., the minimum amount of interest earning assets that Bank "B" has to sell to households, firms or governments, in order to build up their reserves to the required amount), and consequently, the minimum decrease in the nation's moncy supply bank "B" will have = f. Assuming this process continues until the last bank's excess reserve =0, determine the minimum quantify of moncy destroyed by all the banks in the banking system in tatal (i.e. the minimum decrease in the nation's money supply by all the banks in the banking system in total = List holders all of the moncy in our economy? (hint: definition of money) Name the institution that creates money, called checking aceount balances in modern economies? DEFINE THE MONEY SUPPLY Multiplier OR DEPOSIT EXPANSION MULTIPLIER 11. Again, assume the same initial conditions of question 8 , but now the "FED" SELL.S S1 billion in US Government Bonds to Bank " AH and not a Bank " A " deposit customer. Using this new information determine the following (IIIa- IIf) a. The change in the size of the nation's moncy supply (i.e. the quantity of money held by households, business firm and govermments) caused by the FED's sale of US Gov't bonds to Bank "A" alone [i.e. the quantity of money destroyed by the FED when it sold those bonds to Bank "A")(remember Bank "A" is paying the FED for these US Govemment bonds with its reserves assets, =0, because the bank paid with reserve assets, and reserve assets are not money b. The size of Excess Reserues of Bank " A after FED sells $1 billion in US Govemment bonds to Bank A= (hint Bank "A" has to pay the "FED" SI billion worth of Reserve Assets for those US Govemment bonds) c. Using the answer to 11b, determine the minimum quantity of money that Bank "" will to destroy, as Bank "A", sells interest earning assets to households, firms or governments that have a checking account balances at a different bank , say Bank "B" in an effort to get reserve assets from that bank (these buyers will write checks to Bank "A" to pay for the interest earning assets) = d. After Bank " A " sells the interest eaming assets to a these buyers and sends the buycrs' checks to the "elearing house" be cleared and the check clears, determine the size of the Excess Resernes of the buyers' bank, say bank "B" = (Hint Bank "B" will lose SIbillion worth of reserve assets to Bank " A" after the check clears) e. Using the answer to question 11d, determine the minimum quantity of money Bank "B" has to destroy, (i.e., the minimum amount of interest eaming assets that Bank "B" has to sell to households, firms or governments, in order to build up their reserves to the required amount), and consequently, the minimum decrease in the nation's money supply bank "B" will have = f. Assuming this process continues until the last bank's excess reserve 0, determine the minimum quantity of money destroyed by all the banks in the bankine sustem in tatal (i.e. the minimum decrease in the nation's money supply by all the banks in the banking system in total = 1. List holders all of the money in our oconomy? (hint: definition of money) 2. Name the institution that creates money, called checking account balances in modern economies
