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Beginner level macroeconomic question 4. Suppose the banking system in an economy looks like this after an open market operation: ASSETS LIABILITIES Reserves $23 |
Beginner level macroeconomic question
4. Suppose the banking system in an economy looks like this after an open market operation: ASSETS LIABILITIES Reserves $23 | DD $10B Loans $4B | Bonds $4B | and the reserve requirement is 10%. If banks never hold any excess reserves, and people never hold any cash in their pocket, how much would the money supply increase? Suppose banks always keep excess reserves of 2% of their demand deposits. How much would the money supply increase in that case? Under normal circumstances, how would that open market operation affect interest rates? And how would that affect GDPStep by Step Solution
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