Q3 The required reserve ratio for an economy's banking system is 10 percent. The central bank buys $100,000 of short-term government bonds (this is known as an \"open market purchase\") from Bank A. The central bank pays Bank A by adding $100,000 to Bank A's reserve account. a. Using a Taccount, describe the immediate changes to Bank A's balance sheet due to the central bank's open market purchase. In what way is this different from the \"Step 0" in the Macro 4 lecture? In what way is this similar? b. Suppose banks do not want to hold excess reserves, and people hold all money in the form of deposits (i. e., they are cashless). i. By adding to the Taccount' 111 part a, describe the further changes to Bank A's balance sheet as the deposit creation process unfolds. Then, consolidate all of Bank A's balance sheet changes. ii. Using a T-account, describe the changes in the balance sheet of the next bank (say, Bank 13) in the deposit creation process. Then, consolidate all of Bank B's balance sheet changes. iii. Extrapolating from Bank B to other banks in the system, find the total quantity of deposits created as the result of the central bank's bond purchase. c. Suppose instead that banks keep excess reserves equal to 10 percent of deposits. i. Verify that Bank A's balance sheet changes are the same as in part b. ii. Explain how Bank B's balance sheet change are different from that in part b. iii. Find the total quantity of deposits created as the result of the central bank's bond purchase. Compare your result against that found in part b. d. Suppose banks do not want to hold excess reserves Also suppose that people choose to hold 80 percent of their money as deposits, and 20 percent as cash. i. Verify that Bank A's balance sheet changes are the same as in part b. ii. Explain how Bank B's balance sheet changes differ from that' 111 part b. iii. Find the total quantity of deposits plus cash in circulation created as the result of the central bank's bond purchase. Compare your result against that found in part b