Change in the money supply as a result of the bond sale

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Reference no: EM131108274

The Federal Reserve sells $100 million bonds to Bank of America.

a. Show the immediate change in the balance sheet of Bank of America due to this transaction

b. Show the immediate change in the balance sheet of the Federal Reserve due to this transaction

c. Consider the unusual scenario that the public holds no currency and that the banks typically like to hold a reserve to deposit ratio of 50%. What is the money multiplier in this case and what will be the change in the money supply as a result of the bond sale?

Reference no: EM131108274

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