Q2 from Chapter 13 (25pt) The following figures show the balance sheet of the central bank of Freeha (Bank of Freeha, or BOF) as well as the balance sheet of a commercial bank, ABC Bank. Now the economy has two consecutive quarters of negative real GDP growth. BOF decides to buy $100 billion government bonds from ABC Bank. Is this a countercyclical or a procyclical policy? Explain your answer with the following balance sheets and the demand and supply curves of reserves. Bank of Freeha Assets Liabilities and Shareholders' Equity Treasury Bonds $1,600 billion Reserves $1,600 billion Other bonds $500 billion Currency $500 billion Total assets $2,100 billion Total liabilities $2,100 billion ABC Bank Assets Reserves $300 billion Liabilities and Shareholders' Equity Deposits and other liabilities $700 billion Shareholders' equity $300 billion Liabilities + shareholders' equity $1,000 billion Bonds and other investments $700 billion Total assets $1,000 billion Q2 from Chapter 13 (25pt) The following figures show the balance sheet of the central bank of Freeha (Bank of Freeha, or BOF) as well as the balance sheet of a commercial bank, ABC Bank. Now the economy has two consecutive quarters of negative real GDP growth. BOF decides to buy $100 billion government bonds from ABC Bank. Is this a countercyclical or a procyclical policy? Explain your answer with the following balance sheets and the demand and supply curves of reserves. Bank of Freeha Assets Liabilities and Shareholders' Equity Treasury Bonds $1,600 billion Reserves $1,600 billion Other bonds $500 billion Currency $500 billion Total assets $2,100 billion Total liabilities $2,100 billion ABC Bank Assets Reserves $300 billion Liabilities and Shareholders' Equity Deposits and other liabilities $700 billion Shareholders' equity $300 billion Liabilities + shareholders' equity $1,000 billion Bonds and other investments $700 billion Total assets $1,000 billion