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Assume that the banking system has no excess reserves. The combined balance sheet of all chartered banks is (in millions of dollars) 

Asset 
Reserves $15 000 
Loans $ 135000 

Liabilities 
$150 000 

Suppose the general public purchase $500 million in government bonds and pay for them by drawing cheques on their chartered bank deposits. 

1) Calculate the (target) reserve requirement 
2) What is the immediate effect of chartered bank reserve and deposits? Provide the balance sheet. 
3) What is the ultimate effect on chartered bank reserves, deposits, and loans? Provide the final balance sheet 

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M9694125

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