The following are a complete list of the assets and the liabilities of a central bank - let's call the central bank The Reserve Bank.

Balances held at the central bank by foreign central banks and others $25,000mn

Foreign exchange reserves $40,000mn

Government balance $80,000mn

Outstanding loans to banks and others $70,000mn

Exchange settlement balances $90,000mn

Currency at issue and bank vault money $55,000mn

Government and other securities $200,000mn

1) Identify each of the above as an asset or liability for the central bank.

2) Calculate the 'net worth' or 'equity capital' of the central bank.

3) Draw up the balance sheet of the central bank, in full.

4) Explain fully the impact of the following transactions on the central bank's balance sheetand draw up the revised balance sheet:

(i) The government sells $10,000mn worth of government bonds toinvestors.

(ii) The central bank sells $5,000mn worth of foreign exchange to banks.