What happens to the reserves of the bank

Reference no: EM13218973

Suppose the Fed sells $5 million worth of bonds to Econobank.

a.What happens to the reserves of the bank?

b.What happens to the money supply in the economy as a whole if the reserve requirement is 10%, all payments are made by check, and there is no net drain into currency?

c.How would your answer in part b be affected if you knew that some people involved in the money creation process kept some.

Reference no: EM13218973

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