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The FOMC has instructed the FRBNY Trading Desk to purchase $ 3 4 0 million in US . Treasury securities . The Federal Reserve has
The FOMC has instructed the FRBNY Trading Desk to purchase $ million in US Treasury securities The Federal Reserve has
currently set the reserve requirement at percent of transaction deposits. Assume US banks withdraw all excess reserves and give
out loans.
a Assume also that borrowers eventually return all of these funds to their banks in the form of transaction deposits. What is the full
effect of this purchase on bank deposits and the money supply?
b What is the full effect of this purchase on bank deposits and the money supply if borrowers return only percent of these funds to
their banks in the form of transaction deposits?
For all requirements, enter your answers in billions. Round your final answers to decimal places. ie should be
entered as
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