The Economics of Money, Banking and Financial Markets 4th Edition by Frederic Mishkin

Exercise 4

Unless otherwise noted, the following assumptions are made in all questions: The required reserve ratio on checkable deposits iS₁0%, banks do not hold any excess reserves, and the public's holdings of currency do not change.
If the Fed sells $2 million of bonds to Irving the Investor, who pays for the bonds with a briefcase filled with currency, what happens to reserves and the monetary base? Use T-accounts to explain your answer.