I need help soon as possible you need to use the first text book page 322 and half of 323 322 CHAPTER 11 THE MONEY SUPPLY AND INTEREST RATESned to ou (19)sbMore Deposits In the last transaction, borrowers received $600 in cashloans from The Friendly Bank. They may spend some or all of this money,so other people receive it. Regardless, whoever ends up with the $600doesn't want to keep all of it in cash. Let's assume again that people choosea currency-deposit ratio of 0.25. Out of $600, they keep $120 in cash anddeposit $480, because 120/480 = 0.25.The deposits occur on Wednesday, raising The Friendly Bank's totaldeposits and reserves. The bank's balance sheet becomesRLTHE FRIENDLY BANK'S BALANCE SHEET AS OF WEDNESDAYLiabilitiesAssetsmewoThe monetary aggregates areA BankRL680600008 apa bes 0082 bal und dieserb quilidaWEDNESDAYсRYA023UT 40 28 BOKAJA 2X 1280YJOWBINA SHTB=C+RM=C+DCRDMore Loans You can probably guess the next step: after Wednesday'sincrease in reserves, the bank makes more loans. Assume the bank stillchooses a reserve-deposit ratio of 0.25. Because total deposits are $1280,the bank wants reserves of (0.25) ($1280) = $320. To reduce reserves to thislevel, the bank lends $360.These loans occur on Thursday. The bank's balance sheet becomesThe monetary aggregates areD320960THE FRIENDLY BANK'S BALANCE SHEET AS OF THURSDAYAssetsLiabilities320680B=C+RM = C + DDTHURSDAY1000160012806803201280100019601280 4. Start with the Wednesday balance sheet for The Friendly Bank shown below (page 322 in the text).Suppose on Thursday, the Fed buys $100 in government bonds. Complete entries for Thursday andFriday, assuming everyone behaves the same way as in the text.CRDBalance Sheet on WednesdayAssetLiabilitiesD 1280R 680L600Balance Sheet on ThursdayAssetLiabilitiesBalance Sheet on FridayAssetLiabilities320680Ꭱ .R1280DDMB1000MBMBM21600M2M2

The balance sheet of the fed and the banks is dependent on the amount of reserves kept by the bank…

Answered: 4. Start with the Wednesday balance…

EBK CFIN

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ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter15: Managing Short-term Assets

Section: Chapter Questions

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Pretend that the country is in a normal economic climate. Suppose that the Federal Reserve, announces that the Fed plans to initiate the purchase of $2 million worth of Treasury and other bonds that banks and the public are currently holding. The reserve requirement for banks is 10% of deposits. In as much detail as possible, trace through all the steps between this announcement and the ultimate effects on the (i) money supply, (ii) interest rates, and (iii) inflation. Please utilize text explanations, graphs, T-accounts, and equations.
A6 If a bank sells ₺10 million of bonds to the Fed to pay back ₺10 million on the loan it owes, what is the effect on the level of checkable deposits?
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