The table shows a bank balance sheet

Reference no: EM13903828

The table shows a bank balance sheet. The bank has no excess reserves and there is no currency drain. Suppose the bank sells $5 million of govt securities to the central bank in an open market operation.

1.As soon as the sell happens the bank can create $______ million of new money.

2. The total quantity of new money created when the bank has no excess reserves is $_______ million.

Table:

Assets:

Reserves of the Fed $35 mil

Cash in vault $20 mil

Securities $50 mil

Loans $90 mil

Liabilities

Checkable deposits $120 mil

Savings deposits $75 mil

Please explain how you get your answer???

Reference no: EM13903828

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