Suppose the Fed were to inject ($ 100) million of reserves in to the banking system by

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Suppose the Fed were to inject \(\$ 100\) million of reserves in to the banking system by an open market purchase of Treasury bills. If the required reserve ratio were \(10 \%\), what is the maximum increase in \(M_{1}\) that the new reserves would generate? Assume that banks make all the loans their reserves allow, that firms and individuals keep all their liquid assets in depository accounts, and no money is in the form of currency.

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Foundations Of Financial Markets And Institutions

ISBN: 9780136135319

4th Edition

Authors: Frank J Fabozzi, Franco G Modigliani, Frank J Jones

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