TheCentralBank'ssBalanceaSheet3. Monetary Base (or High-Powered MoneyCurrency held by the public + reserves inthe banking systemBank Reserves = Vault Cash + Deposits atthe Fed.The central bank can control the size ofthe monetary base17-6
17-6 The Central Bank’s Balance Sheet 3. Monetary Base (or High-Powered Money) • Currency held by the public + reserves in the banking system • Bank Reserves = Vault Cash + Deposits at the Fed. • The central bank can control the size of the monetary base
11.3ChangingSizeand CompositionCoftheBalanceSheet1. Open Market OperationsThe Federal Reserve buys or sells securities infinancial markets.Figure17.2Changein the Federal Reserve System'sBalance SheetfollowingPurchase of aU.S.Treasury BondAssetsLiabilities+$1billionSecurities+$1billionReserves(U.S.Treasurybond)17-7
17-7 11.3 Changing Size and Composition of the Balance Sheet 1. Open Market Operations • The Federal Reserve buys or sells securities in financial markets
Changing Sizeand Compositionofdthe Balance SheetOpenMarketOperationsFigure17.3Change in the Banking System's BalanceSheet following the Fed's Purchase of aU.S.Treasury BondAssetsLiabilities+$1billionReservesSecurities-$1billion(U.S.Treasurybond)17-8
17-8 Changing Size and Composition of the Balance Sheet Open Market Operations
Changing Size and Composition ofathe BalanceSheet2.Foreign Exchange InterventionFigure17.4Change in the Federal Reserve System'sBalance Sheet followingPurchase of Eurodenominated German Government BondsAssetsLiabilitiesForeignexchange+$1billion+$1billionReservesreserves(Germangovernmentbondsineuros)17-9
17-9 Changing Size and Composition of the Balance Sheet 2. Foreign Exchange Intervention
ChangingSizeand Compositionofdthe BalanceSheetForeign Exchange InterventionFigure17.5Change in the Banking System's Balance Sheetfollowing the Fed's Purchase of EurodenominatedGermanGovernment BondsAssetsLiabilities+$1billionReservesSecurities-$1billion(Germangovernmentbonds)17-10
17-10 Changing Size and Composition of the Balance Sheet Foreign Exchange Intervention