Show the changes to the balance sheets for commercial banks when the Federal Reserve buys $50 million in US Treasury Bills. If the public holds a fixed amount of currency ( so that all loans create an equal amount of deposits in the banking system), the minimum reserve requirement is 5%, by how much will checkable bank deposits in commercial banks change?

Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter13: Money And The Banking System
Section: Chapter Questions
Problem 17CQ
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Show the changes to the balance sheets for
commercial banks when the Federal Reserve buys
$50 million in US Treasury Bills. If the public holds a
fixed amount of currency ( so that all loans create an
equal amount of deposits in the banking system), the
minimum reserve requirement is 5%, by
how much will checkable bank deposits in
commercial banks change?
Transcribed Image Text:Show the changes to the balance sheets for commercial banks when the Federal Reserve buys $50 million in US Treasury Bills. If the public holds a fixed amount of currency ( so that all loans create an equal amount of deposits in the banking system), the minimum reserve requirement is 5%, by how much will checkable bank deposits in commercial banks change?
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