Anonymous
Anonymous asked in Social ScienceEconomics · 1 month 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

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  • Oiy
    Lv 5
    1 month ago

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

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  • Judy
    Lv 7
    1 month ago

    do your own homework.

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