7. Critical analysis

Q16 Suppose that the Federal Reserve purchases a bond for $100,000 from Reggie Rich, who deposits the proceeds in the Manufacturers National Bank. I

nitially, as a result of this bond purchase, the money supply will________(Increase or decrease) by ___________ .

Suppose the required reserve ratio is 25%.

As the result of Richs deposit, Manufacturers Bank will be able to extend $_______ in additional loans.

As a result of this purchase by the Fed, the maximum increase in the quantity of checkable deposits that could result throughout the entire banking system is $______.