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Using T-accounts, show what happens to checkable deposits in the banking system when the Fed sells $2 million of bonds to the First National Bank.

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Using T-accounts, show what happens to checkable deposits in the banking system when the Fed sells $2 million of bonds to the First National Bank. Assume the re- serve requirement ration is 10%. (Note: you should consider how the endogenous deposit creation process affects the whole banking system. ) (5 points)

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