Open Market Operations

1 Assume the required reserve ratio is 20% and the Open Market Committee of the FED sells $200 billion in bonds to the public. Assuming banks give out as many loans as possible, what is the total change in the money supply? What is the total change in Transaction Accounts? If the M1 was originally $8500 billion, what is the new M1 ( After the change)? You must show your work.

2. Assume the required reserve ratio is 12.5% and the Open Market Committee of the FED buys $300 billion in bonds from the public. Assuming banks give out as many loans as possible, what is the total change in the money supply? What is the total change in Transaction Accounts? If the M1 was originally $7500 billion, what is the new M1 ( After the change)?You must show your work.

3. Assume the required reserve ratio is 25% and the Open Market Committee of the FED sells $250 billion in bonds to the public. Assuming banks give out as many loans as possible, what is the total change in the money supply? What is the total change in Transaction Accounts? If the M1 was originally $9500 billion, what is the new M1 ( After the change)You must show your work.

4. Assume the required reserve ratio is 10% and the Open Market Committee of the FED buys $45 billion in bonds from the public. Assuming banks give out as many loans as possible, what is the total change in the money supply? What is the total change in Transaction Accounts? If the M1 was originally $9500 billion, what is the new M1 ( After the change)?You must show your work.