Simple model of multiple deposit creation

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Q. Using T-accounts Explain how Illustrate what happens to the money base, bank reserves also checkable deposits in the banking system when the Fed sells $2 million worth of bonds to the 1st National Bank. Using the simple model of multiple deposit creation, state the ultimate impact on M1 from the Fed's sale. For the question, suppose which no excess reserves are held by the banks, which the currency holdings of the public do not change also which the required reserve ratio, r, is 10%.

Reference no: EM1313325

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