Question

Show the changes to the T-accounts for the Federal Reserve and for commercial banks when the...

Show the changes to the T-accounts for the Federal Reserve and for commercial banks when the Federal Reserve buys $50 million in U.S. Treasury bills. If the public holds a fixed amount of currency (so that all loans create an equal amount of deposits in the banking system), the minimum reserve ratio is 10%, and banks hold no excess reserves.

Show the initial change in the balance sheet for Federal Reserve (use + to indicate an increase and – to indicate a decrease).

Assets Liabilities
Treasury Bills $ million Monetary Base $ million

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