Anonymous asked in Social ScienceEconomics · 8 months ago

Monetary Policy?

Suppose the banking system has reserves of $750,000, demand deposits of $2,500,000 and a reserve requirement of 20%. 


a. If the Fed now purchases $125,000 worth of government bonds from the public, what are the new excess reserves of the banking system (Assume the public deposits the entire $125,000 in demand deposits).  


b. How much can the banking system increase the money supply by, given the new reserve position. 

2 Answers

  • Oiy
    Lv 6
    8 months ago

    It will increase money supply =1/0.2 x 125,000.

  • Judy
    Lv 7
    8 months ago

    do your own homework.

Still have questions? Get answers by asking now.