Suppose the reserve requirement is 10 percent. a. If the Fed buys $10 billion worth of bonds
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Suppose the reserve requirement is 10 percent.
a. If the Fed buys $10 billion worth of bonds from commercial banks, what is the largest possible increase in the money supply that could result from this open market operation?
b. What accompanying change in the reserve requirement would double the largest possible increase in the money supply that could result from this open market operation?
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