Question
Suppose the following occur: (1) Alpha Bank buys $225m of treasury bonds from the FED, (2) Beta Bank takes out $175m discount loan from the
Suppose the following occur: (1) Alpha Bank buys $225m of treasury bonds from the FED, (2) Beta Bank takes out $175m discount loan from the FED, (3) Bill Gates writes a check for $50m on his account at Gamma Bank to the US Treasury for taxes: the treasury deposits this check in its account at the FED, and (4) Jack, who has an account at Alpha Bank, writes a check for $60m to Jill who banks at Gamma Bank. Show these actions on the banks balance sheets, and the FEDs balance sheet. What will be the net effect on the monetary base of these actions?
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