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

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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 $$100$ worth of government bonds from private bond dealers, what are the excess reserves of the banking system?

(Assume that the bond dealers deposit the $$100$ in demand deposits.) How much can the banking system increase the money supply, given the new reserve position?

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Economics

ISBN: 9781032046723

9th Edition

Authors: William Boyes, Michael Melvin

Question Posted: Apr 23, 2024 02:01 AM

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

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a To calculate the maximum potential increase in the money supply we need to determine the excess re...View the full answer

Economics

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