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Mars2501 [29]
4 years ago
7

Suppose the reserve requirement in the united states is 20% - Suppose the federal reserve wants to increase the money supply by

100 billion. the federal reserve should decrease the reserve requirement by ___.
Business
1 answer:
asambeis [7]4 years ago
3 0

Answer:

Reserve requirement = 20% or 0.250

Simple money multiplier = 1/Reserve Ratio = 1/0.2 = 5

Note that,

Increase in money supply = Increase in total reserves * Simple money multiplier

$100 Billion = Increase in total reserves * 5

Increase in total reserves = $20 billion

This means that the federal reserve should decrease the reserve requirement by purchasing $20 billion worth of US government bonds from banks, which will lead to increase of $100 billion in money supply.

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Answer:

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6 0
3 years ago
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3 0
3 years ago
Logan Nettles approached Kevin Lang about becoming a partner in a firm that destroys environmental waste. While Logan would like
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Answer:

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