Question content area

Part $1$

If the Fed sells$$ $$2$ million of bonds to the First National$$ Bank, what happens to reserves and the monetary$$ base? Complete the$$ T$-$accounts below to explain your answer.$$

Part $2$

First National Bank

Federal Reserve System

Assets

Liabilities

Assets

Liabilities

Reserves$$

$$

$$

$+$ $$2$ million

$-$ $$2$ million

$$0$

Securities$$

$$

$$

$+$ $$2$ million

$-$ $$2$ million

$$0$

$$Reserves$$

$$

$$

$+$ $$2$ million

$-$ $$2$ million

$$0$

Securities$$

$$

$$

$+$ $$2$ million

$-$ $$2$ million

$$0$