Q25-2

8 pts Question 25 Suppose that the required reserve ratio is 11%, currency in circulation is $800 billion, the amount of checkable deposits is $920 billion, and excess reserves are $25 billion. b) Suppose the central bank conducts an unusually large open market purchase of bonds held by banks of $1,800 billion due to a sharp contraction in the economy. Assuming the ratios you calculated in part (a) remain the same, predict the effect on the money supply. (2 mar 8 pts Question 25 Suppose that the required reserve ratio is 11%, currency in circulation is $800 billion, the amount of checkable deposits is $920 billion, and excess reserves are $25 billion. b) Suppose the central bank conducts an unusually large open market purchase of bonds held by banks of $1,800 billion due to a sharp contraction in the economy. Assuming the ratios you calculated in part (a) remain the same, predict the effect on the money supply. (2 mar