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Anna [14]
3 years ago
15

Suppose that the reserve requirement for checking deposits is 10 percent and that banks do not hold any excess reserves. If the

Fed sells $1 million of government bonds, what is the effect on the economy’s reserves and money supply? Now suppose the Fed lowers the reserve requirement to 5 percent, but banks choose to hold another 5 percent of deposits as excess reserves. Why might banks do so? What is the overall change in the money multiplier and the money supply as a result of these actions?
Business
1 answer:
Vladimir79 [104]3 years ago
8 0

Answer:

Take a look to the following explanation

Explanation:

Reserve ratio ,10%=0.1

Money multiplier=1/reserve ratio=1/0.1=10

If feds sells 1million$ bond the economy reserves increases by 1 million$ and money supply decrease by 10 million $(1*money multiplier).

If fed changes RR to 5% but banks choose to hold another ,5 percent as excess reserve ,then on aggregate actual reserve ratio will be 10%. So money multiplier would remain same,10 and so the money supply

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Helen is keen on creating her own company when she graduates from college. She has researched the sector and developed contacts
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Hello,

My question - are there any answer choices.

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6 0
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The process of collecting the relevant information about the specific topic helps in analyzing the necessary data about the company on the basis of the customer requirement.

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Answer:

everyone is willing to pay the taxes to receive the benefits.

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