The Federal Reserve purchases $50,000 in U.S. government securities from XYZ securities Dealers to stimulate a...

 

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The Federal Reserve purchases $50,000 in U.S. government securities from XYZ securities Dealers to stimulate a sluggish economy. The Fed has set the reserve requirement at 20 percent. Your job is to trace the path of the Fed's $50,000 purchase through four loans transactions from First Bank through Fourth Bank. a) Fill in each bank's balance sheet with the amount of the new deposit, required reserves, excess reserves, and the amount of the loan. (1x4=4marks) b) Calculate the total money creation in the economy with the help of formula. (1 Mark) The Federal Reserve purchases $50,000 in U.S. government securities from XYZ securities Dealers to stimulate a sluggish economy. The Fed has set the reserve requirement at 20 percent. Your job is to trace the path of the Fed's $50,000 purchase through four loans transactions from First Bank through Fourth Bank. a) Fill in each bank's balance sheet with the amount of the new deposit, required reserves, excess reserves, and the amount of the loan. (1x4=4marks) b) Calculate the total money creation in the economy with the help of formula. (1 Mark)

Answer rating: 100% (QA)

a Federal reserve 50000 and creates money The money creation is shown through 4 banks For each bank ... View the full answer