Suppose that JP Morgan CHase sells $100 million in Treasury bills to the Fed.
A) Use T- Accounts to show the immediate effect of this sale on the Balance sheets of JP Morgan Chase and the Fed
B) Suppose that before selling the Treasury bills, JP MOrgan Chase had no excess reserves. Suppose that the required reserve raitio is 20%. Suppose that JP Morgan makes the maximum loan it can from the fund aquired by selling the Treasury Bill. Use a T- Account to show the initial impact of granting the loan on JP Morgan Balance Sheet. Also include on this T-Account the transaction from part (A).
C) Now Suppose that whoever took out the loan in part B) writes a check for this amount and that the person recieving the check depostis it in Wells Fargo bank. Show the effect of these transactions on the Balance sheet of JP Morgan and Wells Fargo Bank. after the check has cleared. ( On JP Morgans T- Account include the transactions from part A and B
D) If Currency is $400 Billion , total reserves of the banking system are $600 billion and total checkable deposits are $2,100 Billion, What is the maxixum increase in the money supply that can resut from the transactoin in part A ( that is the maximum increase after all actions resulting from the transaction in part A have occured)?
Suppose that JP Morgan CHase sells $100 million in Treasury bills to the Fed.
A) Use T- Accounts to show the immediate effect of this sale on the Balance sheets of JP Morgan Chase and the Fed
B) Suppose that before selling the Treasury bills, JP MOrgan Chase had no excess reserves. Suppose that the required reserve raitio is 20%. Suppose that JP Morgan makes the maximum loan it can from the fund aquired by selling the Treasury Bill. Use a T- Account to show the initial impact of granting the loan on JP Morgan Balance Sheet. Also include on this T-Account the transaction from part (A).
C) Now Suppose that whoever took out the loan in part B) writes a check for this amount and that the person recieving the check depostis it in Wells Fargo bank. Show the effect of these transactions on the Balance sheet of JP Morgan and Wells Fargo Bank. after the check has cleared. ( On JP Morgans T- Account include the transactions from part A and B
D) If Currency is $400 Billion , total reserves of the banking system are $600 billion and total checkable deposits are $2,100 Billion, What is the maxixum increase in the money supply that can resut from the transactoin in part A ( that is the maximum increase after all actions resulting from the transaction in part A have occured)?
