If the Fed buys $1 million of bonds from the First National Bank

| June 14, 2018

4.If the Fed buys $1 million of bonds from the First National Bank, but an additional 10%of any deposit is held as excess reserves, what is the total increase in checkable deposits if therequired reserve ratio is 10%? (Hint: Start by examining T-accounts for the banks at each stepof the multiple expansion process.)5. Explain why the simple money multiplier may not accurately describe changes in moneysupply.1. How does the Federal Reserve System represent the interests of the public and theprivate sector?

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