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2. The Federal Reserve Bank of Westogia buys a treasury security back from John Smith, uI'lEI his broker. for 5103. John deposits this money into
2. The Federal Reserve Bank of Westogia buys a treasury security back from John Smith, "uI'lEI his broker. for 5103. John deposits this money into his bank account. The bank now has 5100 in additional deposit, so it loans out the maximum allowable amount to earn interest. Assume that the reserye ratio is 25%. a. Calculate the money multiplier for Westogia. Show your working. b. How much additional money will this action create in the economy? Show your working
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