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vivado [14]
2 years ago
7

Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required reserve ra

tio is 5.00%, and the Federal Reserve wants to increase the money supply by $55.00 million, the Fed would need to make an open market purchase of $________ million. (Insert your answer in millions, and round to two decimal places.)
Business
1 answer:
GrogVix [38]2 years ago
3 0

Answer:

2.75 million

Explanation:

Required reserves is the percentage of deposits required of banks to keep as reserves by the central bank

Required reserves = reserve requirement x deposits

Increase in value of money supply as a result of the purchase is determined by the money multiplier

Money multiplier = 1 / reserve requirement

1/0.05 = 20

increase in money supply = amount of open market purchase / reserve requirement

55  / 20 = 2.75 million

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Answer:

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Explanation:

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4. does not do the required homework before beginning development.

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I am Lyosha [343]

Answer:

30 in total

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