Monetary base and the level of reserves

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Explain and illustrate graphically the effect of the following on the monetary base and the level of reserves. Use the T-accounts to illustrate and explain your answer.

a. Central bank purchases $30 million of government securities for Chase Bank.

b. The Fed sells $200, 000 in government bonds to the public (public pays using currency held under the beds)

c. The Fed lends the Bank of America additional $20 million but depositors withdraw $5million

d. The Fed purchases from the public $3 million of government bonds and the public deposits the proceeds

f. If Chase receives an extra $30 million of reserves but decides not to lend any of these reserves out. How much deposit creation takes place for the entire banking system? Explain your answer.

g. The public cash withdrawals from banks decrease the central bank liabilities and shrink the size of the banking system balance sheet. True/False? Explain

Reference no: EM13840153

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