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Suppose that, as a result of a public health crisis, commercial banks decide to increase the amount of cash in their vaults by $200m, in

Suppose that, as a result of a public health crisis, commercial banks decide to increase the amount of cash in their vaults by $200m, in case this is needed to meet a sudden outflow of deposits.

(a) Show the effects this would have on the balance sheets of commercial banks and the central bank

(b) If depositors then withdraw $100m of this, show the combined effect on the balance sheets of commercial banks.

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