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Suppose the nation's Central Bank (CB) decides to engineer an increase in the nation's money supply, and begins the process with an open market operation
Suppose the nation's Central Bank (CB) decides to engineer an increase in the nation's money supply, and begins the process with an open market operation (OMO), in which the CB purchases 2000 worth of Treasury securities from Household j (HH j). HH j deposits the entire 2,000 in cash into a demand deposit account at Bank A. Thus, the initial increase in total bank reserves is 2,000 cash in the vault.The CB has set the reserve requirement ratio (rd) at 50%.The increase in excess reserves is equal to:
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