a) Draw the T-accounts for Fred’s Bank if the FED buys a $20,000 treasury security from...

a) Draw the T-accounts for Fred’s Bank if the FED buys a $20,000 treasury security from Fred and Fred puts all the money he gets for it in the bank. Assume the reserve requirement set by the FED is 8%. (1 point)

b) Economist A claims that this will result in a change in the money supply of $250,000. Explain how this is possible. (1 point)

c) Economist B claims that the data shows the money supply only went up by $200,000. Explain how this is possible. (2 points)

Expert Solution

Rahul Sunny answered 2 years ago

1. a) Draw the T-accounts for Fred’s Bank if the FED buys a $20,000 treasury security...

1. a) Draw the T-accounts for Fred’s Bank if the FED buys a $20,000 treasury security from Fred and Fred puts all the money he gets for it in the bank. Assume the reserve requirement set by the FED is 8%. (1 point) b) Economist A claims that this will result in a change in the money supply of $250,000. Explain how this is possible. (1 point) c) Economist B claims that the data shows the money supply only went...

3. Utilizing T-accounts for all relevant actors, answer the following questions, a. If the FED buys...

3. Utilizing T-accounts for all relevant actors, answer the following questions, a. If the FED buys a $10,000 treasury bill from Carlos Slim and he deposits the money in his bank, what happens to reserves and the monetary base? b. If instead Carlos Slim deposits $5,000 in his bank and cashes in the remaining $5,000, what happens to reserves and the monetary base?

1a. Using t-accounts for the Fed and a commercial bank show the accounting entries for a...

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Show these assets/liabilities in T accounts of the Federal Reserve, Bank A, Bank B, US Treasury...

Show these assets/liabilities in T accounts of the Federal Reserve, Bank A, Bank B, US Treasury and the General Public. Each entry should appear at least twice across T accounts of those institutions. - Cash - Reserves - Deposits - Bank Capital - Discount Loans - Consumer Loans - Federal Funds Loans by Bank A to Bank B - Treasury Bonds

A bank borrows $100,000 from the Fed, leaving a $100,000 Treasury bond on deposit with the...

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An investor buys a security at a bank discount rate of 0.046 with 180 days to...

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At the beginning of first quarter 2015, the bank buys an available-for-sale security for $15. At...

At the beginning of first quarter 2015, the bank buys an available-for-sale security for $15. At the end of the first quarter the price is $17. The bank sells the security at $18 during the second quarter 2015. During the second quarter 2015, as the result of the sale, the bank shareholder's equity ______, the retained profit ________ and the capital reserve ________. A. increased by $1; increased by $3; decreased by $2 B. increased by $3; increased by $1;...

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