Answer to Question #38086 in Macroeconomics for Helen K.

Question #38086
Suppose the Fed sells $5 million worth of bonds to Econobank. What happens to the reserves of the bank? 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? How would your answer in part b be affected if you knew that some people involved in the money creation process kept some of their funds as cash?
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