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4 Money supply process (40pts.) 1. If the Fed sells $1.5 million of bonds to the First National Bank, what happens to the assets and liabilities of the . Fed's Taccount? . First National Bank's Taccount? * the monetary base? 2. If the Fed lends Ole-bank a total of $200 million but depositors withdraw $150 million and hold it as currency, what happens to the assets and liabilities of the . Fed's Taccount? o Ole-bank's Taccount? o the monetary base? 3. If a bank depositor withdraws $15,000 of currency from an account, what happens to reserves, check- able deposits, and the monetary base? 4. If the Fed reduces reserves by selling $5 million worth of bonds to the banks, what will the T-account of the banking system look like when the banking system is in equilibrium? (Assuming 10% required reserve ratio). What will have happened to the level of checkable deposits? 5. If the Fed buys $1 million of bonds from the First National Bank, but an additional 10% of any de- posit is held as excess reserves on the top of 10% required reserve ratio, what is the total increase in checkable deposits? Assume there is no currency in circulation. (Hint: Use T-accounts to show what happens at each step of the multiple expansion process. Or think about the relationship between the reserve and checkable deposit intuitively.)