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Naya [18.7K]
3 years ago
12

The Fed buys​ $20,000 of government securities. The desired reserve ratio is 5 percent and the currency drain is zero. What will

be the change in the quantity of​ money?
Business
1 answer:
JulsSmile [24]3 years ago
3 0

Answer:

The answer is $400,000

Explanation:

Quantity theory of money states that the quantity of money is directly proportional total spending in an economy.

Change in quantity of money = new deposits (which can also be new security) ÷ reserve requirements

The new security is $20,000

reserve requirements is 5 percent

Change in quantity of money is:

$20,000 / 0.05

=$400,000

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Suppose the total market value of all final goods and services produced this year in economy X is $4 million. Of the $4 million
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Answer:

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