Answer Happy

Please describe in your own words the money creation process when the central bank purchases $2 million worth of government bonds from the commercial bank, Bank A. Suppose that all the commercial banks in the banking system share the same desired reserve ratio at 10% and the central bank estimates that there is no cash drain in the banking system. 1. How much money will be created? 2.Please draw the money market diagram to show how this monetary policy will affect the market interest rate. 3.If the central bank has underestimated the cash drain, there will be too much money created or the opposite? Explain.