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Econ 4th Edition by William McEachern
Edition 4ISBN: 978-1285423548Econ 4th Edition by William McEachern
Edition 4ISBN: 978-1285423548 Exercise 7
Describe how banks create money
(Money Creation) Show how each of the following initially affects bank assets, liabilities, and reserves. Do not include the results of bank behavior resulting from the Fed's action. Assume a required reserve ratio of 0.05.
a. The Fed purchases $10 million worth of U.S. government bonds from a bank.
b. The Fed loans $5 million to a bank.
c. The Fed raises the required reserve ratio to 0.10.
(Money Creation) Show how each of the following initially affects bank assets, liabilities, and reserves. Do not include the results of bank behavior resulting from the Fed's action. Assume a required reserve ratio of 0.05.
a. The Fed purchases $10 million worth of U.S. government bonds from a bank.
b. The Fed loans $5 million to a bank.
c. The Fed raises the required reserve ratio to 0.10.
Explanation
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(a) The Fed purchases $10 million worth ...
Econ 4th Edition by William McEachern
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