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Suppose the Federal Reserve decided to buy $15 billion worth of government securities in the open market. a. By how much will M1 change initially
Suppose the Federal Reserve decided to buy $15 billion worth of government securities in the open market. a. By how much will M1 change initially if the entire $15 billion is deposited into transactions accounts? Note: If M1 decreases be sure to include a negative sign (-) in front of your answer. M1 will initially change by: billion b. How will the lending capacity of the banking system be affected if the reserve requirement is 10 percent? Note: If lending capacity decreases be sure to include a negative sign (-) in front of your answer. Total lending capacity will change by: billion
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