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  3. 5. assume that the reserve requirement is 5 percen

5. Assume that the reserve requirement is 5 percent. All other things being equal: Will the money...

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Economics

5. Assume that the reserve requirement is 5 percent. All otherthings being equal:

Will the money supply expand more if the Fed buys $2,000 worthof bonds or if someone deposits in a bank $2,000 that he had beenhiding in his cookie jar?

If one creates more, how much more does it create?

6. Assume that the banking system has total reserves of $100billion. Assume also that required reserves are 10 percent ofchecking deposits and that banks hold no excess reserves andhouseholds hold no currency.

What is the money multiplier? _______What is the money supply?$__________

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Question 5 Reserve requirement 5 or 005 Money multiplier 1Reserve requirement 1005 20 The money multiplier is 20 If Fed buys 2000 worth of bonds then excess reserves with banks would increase by 2000 Calculate the total increase in the money supply Increase Increase in excess reserves Money    See Answer
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