The following are a complete list of the assets and the liabilities of a central bank lets call the central bank The Reserve Bank.

Net foreign currency reserves (and gold) $70bn

Currency at issue and bank vault money $90bn

Other assets $30bn

Government balance $40bn

Balances held at the central bank by foreign central banks and others $3bn

Outstanding loans to banks and others $1bn

Exchange settlement balances $85bn

Other liabilities $28bn

Government and other securities $160bn

1 The central bank sells $20bn worth of government bonds to the Bank of Mellon, which is a private bank. How does this affect the balance sheet of the Reserve Bank? Which item or items change, and by how much? (2 marks)