Federal reserve banks purchase securities from banks

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Use commercial bank and Federal Reserve Bank balance sheets to demonstrate the effect of each of the following transactions on commercial bank reserves:

a) Federal Reserve Banks purchase securities from banks.

b) Commercial banks borrow from Federal Reserve Banks at the discount rate.

c) The Fed reduces the reserve ratio

d) Commercial banks increase their reserves after the Fed increases the interest rate that it pays on reserves

Reference no: EM131085860

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