Problem
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?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.