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Suppose, currently, the annual interest rate on a typical loan available through commercial banks is at 4.5%. Suppose too that banks face a 5% reserve
Suppose, currently, the annual interest rate on a typical loan available through commercial banks is at 4.5%. Suppose too that banks face a 5% reserve requirement, 2/5 of which can be met by borrowing from the Federal Reserve at a discount rate of rate of 1%. A $.90B open market purchase by the Federal Reserve can increase the nation's money supply by as much as _____ billion dollars.
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