Suppose the Fed conducts an open market purchase by buying $10 million in Treasury bonds from Great Western Bank. Sketch out the balance sheet changes that will occur as Great Western converts the bond sale proceeds to new loans. The initial Great Western bank balance sheet con- tains the following information (all in $ millions): Assets – reserves 30, bonds 250, and loans 50; Liabilities – deposits 300 and equity 30.
Suppose the Fed conducts an open market purchase by buying $10 million in Treasury bonds from Great Western Bank. Sketch out the balance sheet changes that will occur as Great Western converts the bond sale proceeds to new loans. The initial Great Western bank balance sheet con- tains the following information (all in $ millions): Assets – reserves 30, bonds 250, and loans 50; Liabilities – deposits 300 and equity 30.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter28: Monetary Policy And Bank Regulation
Section: Chapter Questions
Problem 38P: Suppose the Fed conducts an open market purchase by buying 10 million in Treasury bonds from Acme...
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Suppose the Fed conducts an open market purchase by buying $10 million in Treasury bonds from
Great Western Bank. Sketch out the balance sheet changes that will occur as Great Western
converts the bond sale proceeds to new loans. The initial Great Western bank balance sheet con-
tains the following information (all in $ millions): Assets – reserves 30, bonds 250, and loans 50;
Liabilities – deposits 300 and equity 30.
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