Answer to Question #272047 in Economics for unknown

Question

(a) Suppose the Fed purchases $100 million of bonds from a primary dealer. Show the changes that occur in balance sheet items by using T-accounts the consequences of this transaction starting from the initial balance sheet position for:

I. Banking system

II. Federal reserve

(b) Suppose the Fed conducts an open market sale of $100 million of bonds to a primary dealer, show the balance sheet for Federal Reserve.

(c) During the Christmas season, the public wants to hold more currency to buy gifts and so withdraws $100 million in cash, show the effect on the T-account:

I. Non- public bank

II. Banking system

III. Federal reserve

Answer 1

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