Step-by-step solution file
) Using a required reserve ratio of 10% and assuming that banks
) Using a required reserve ratio of 10% and assuming that banks keep no excess reserves, what
is the value of government securities the Fed must purchase if it wants to increase the money
supply by $2 million?
- To figure the amount required to purchase to increase the money supply by $2 Million, simply
conduct a ?solve for X? formula: ?X? * 10=$2,000,000
Divide both sides by 10 so formula now reads X=$2,000,000 / 10
X = $200,000 The government must purchase $200,000 in Securities
This question was answered on: Feb 21, 2020
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