14. Suppose the banking system has vault cash of $1,000, deposits at the Fed of $2,000, and...

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14. Suppose the banking system has vault cash of $1,000, deposits at the Fed of $2,000, and demand deposits of

$10,000.

a. If the reserve requirement is 20 percent, what is the maximum potential increase in the money supply given the banks’ reserve position?

b. If the Fed now purchases $500 worth of government bonds from private bond dealers, what are excess reserves of the banking system? (Assume that the bond dealers deposit the $500 in demand deposits.)

How much can the banking system increase the money supply given the new reserve position?

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Fundamentals Of Economics

ISBN: 9780618992676

4th Edition

Authors: William Boyes , Michael Melvin

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Question Posted: Jul 08, 2024 09:01 AM

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14. Suppose the banking system has vault cash of $1,000, deposits at the Fed of $2,000, and...

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Fundamentals Of Economics

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