Howard's Supply Co. suffered a fire loss on April 20, 2021. The company's last physical inventory was taken January 30, 2021, at
1 answer:
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Solution:
The reserve ratio is 10%.
Money multiplier = =
= 10.
So, the money multiplier increases by 10.
Money supply = amount x money multiplier = 1,000 x 10 = 10000
Therefore, because any certain items are equivalent, the rise in the currency supply is 10000 dollars.
When the FED sells 1,000 million worth of debt, this would further increase the monetary market, as the investments are fresh funds and the income from the bank is now used in the money supply.