Question

Assume that the reserve requirement is 20 percent. If the Federal Reserve buys $5,000 worth of bonds, the largest possible increase in the money supply is. If someone deposits in a bank $5,000 that she had been hiding in her cookie jar, the largest possible increase in the money supply is. True or False: All other things equal, the money supply will expand more if someone deposits in a bank $5,000 that she had been hiding in her cookie jar than if the Federal Reserve buys $5,000 worth of bonds. True or False?

Answer 1

Answer

The answer and procedures of the exercise are attached in a microsoft excel document.  

Explanation  

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