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sleet_krkn [62]
3 years ago
15

The reserve ratio equals 2 percent. The Fed buys $1 million in U.S. government securities. The most the money supply can increas

e is a. $10 million. b. $40 million. c. $50 million. d. $100 million.
Business
1 answer:
Rudik [331]3 years ago
7 0

If the Fed buys $1 million in U.S. government securities. The most the money supply can increase is: c. $50 million.

<h3>Money supply</h3>

Using this formula

Mioney supply=Government securities/Reserve ratio

Where:

Government securities=$1 million

Reserve ratio=2% or 0.02

Let plug in the formula

Money supply=$1 million/0.02

Money supply=$50 million (Increase)

Therefore the most the money supply can increase is: c. $50 million.

Learn more about money supply here:brainly.com/question/3625390

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