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Refer to the balance sheet below for the Bank of Pecunia. Suppose that the Bank of Pecunia undertakes the following two transactions: Transaction 1 :
Refer to the balance sheet below for the Bank of Pecunia.
Suppose that the Bank of Pecunia undertakes the following two transactions:
Transaction : Sells $ of its foreign assets and receives as payment
a $ check on a private bank.
Transaction : Buys $ worth of domestic government bonds with domestic currency.
Illustrate the combined effects of these two transactions by filling in the new balance sheet for the Bank of
Pecunia below.
The isolated effect of Transaction is
in the domestic money supply.
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