Consider an open market purchase by the Fed of $14 billion of Treasury bonds. What is the impact of the purchase on the bank from which the Fed bought the securities?

The banks securities fall by $14 billion and its reserves rise by $14 billion.

Compute the impact on M1 assuming that: (1) the required reserve ratio is 10 percent; (2) the bank does not wish to hold excess reserves; and (3) the public does not wish to hold currency.

The simple deposit multiplier will be: .

The value of deposits (and M1) will (Click to select) rise fall by $ ____ billion.