The Fed buys $2 million of securities from AIG. If AIGs bank has a desired reserve ratio
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The Fed buys $2 million of securities from AIG. If AIG’s bank has a desired reserve ratio of 0.1 and there is no currency drain, calculate the bank’s excess reserves as soon as the open market purchase is made, the maximum amount of loans that the banking system can make, and the maximum amount of new money that the banking system can create.
If the desired reserve ratio is 5 percent, the currency drain ratio is 20 percent of deposits, and the central bank makes an open market purchase of $1 million of securities, calculate the change in.
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