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LUCKY_DIMON [66]
1 year ago
9

Suppose the required reserve ratio is 8% and the Fed purchases $10 million worth of Treasury bills from Wells Fargo. What's the

maximum possible increase of deposits in the banking system
Business
1 answer:
ahrayia [7]1 year ago
7 0

The answer is $100 million.

The reserve ratio is the percentage of a commercial bank's deposits that it must retain in cash as a reserve in case of large client withdrawals, as determined by the central bank.

The reserve ratio is a significant monetary policy instrument used by the Federal Reserve in the United States to boost or decrease the economy's money supply.

Banks require an RRR of 8% for demand deposits, not for funds received through the selling of treasury bills to the FED, hence Wells Fargo will be free to raise its loans by $100 million.

To know more about reserve ratio click here:

brainly.com/question/13758092

#SPJ4

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