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Suppose that the required reserve ratio (R) is 13 percent and that banks do not hold any excess reserves.

What is money multiplier, given this situation?

Hint

Suppose that the Fed conducts a $490 million open market purchase of government bonds.

In addition, suppose that the required reserve ratio is 26 percent and that banks do not hold any excess reserves.

What is the effect on the money supply? More precisely, by how much will the money supply increase?

Hint

Suppose that the Fed sell $370 million of government bonds.

In addition, suppose that the required reserve ratio (R) is 44 percent and that banks do not hold any excess reserves.

What is money multiplier?

Hint

Suppose that the Fed sells $140 million of government bonds.

In addition, suppose that the required reserve ratio is 46 percent and that banks do not hold any excess reserves.

What is the effect on the money supply? More precisely, by how much will the money supply change?

Hint

Assume that the banking system has total reserves of $966 billion.

Assume also that required reserves are 42 percent and that banks do not hold any excess reserves and households hold no currency.

What is the money multiplier?

Hint

Assume that the banking system has total reserves of $152 billion.

Assume also that required reserves are 8 percent and that banks do not hold any excess reserves and households hold no currency.

What is the size of the M1 money supply?

Hint

Assume that the banking system has total reserves of $725 billion.

Assume also that required reserves are 29 percent and that banks do not hold any excess reserves and households hold no currency.

Now suppose that the Fed decreased the required reserves to 23.2.

What is the new multiplier?

Hint

Assume that the banking system has total reserves of $572 billion.

Assume also that required reserves are 26 percent and that banks do not hold any excess reserves and households hold no currency.

Now suppose that the Fed decreases the required reserves to 20.8.

What is the level of excess reserves? Make sure to include a negative sign if necessary.

Hint

Assume that the banking system has total reserves of $575 billion.

Assume also that required reserves are 25 percent and that banks do not hold any excess reserves and households hold no currency.

Now suppose that the Fed decreased the required reserves to 20.

As a result of this new policy, by how much has the money supply increased?

Hint

Assume that the banking system has total reserves of $650 billion.

Assume also that required reserves are 26 percent and that banks do not hold any excess reserves and households hold no currency.

What is money multiplier?

Hint

Assume that the banking system has total reserves of $253 billion.

Assume also that required reserves are 11 percent and that banks do not hold any excess reserves and households hold no currency.

What is the level of deposits?

Hint

Assume that the banking system has total reserves of $624 billion.

Assume also that required reserves are 24 percent and that banks do not hold any excess reserves and households hold no currency.

Now suppose that the Fed increased the required reserves to 28.8.

What is the new multiplier?

Hint

Assume that the banking system has total reserves of $253 billion.

Assume also that required reserves are 11 percent and that banks do not hold any excess reserves and households hold no currency.

Now suppose that the Fed increased the required reserves to 13.2.

What is the level of excess reserves? Make sure to include a negative sign if necessary.

Hint

Assume that the banking system has total reserves of $756 billion.

Assume also that required reserves are 42 percent and that banks do not hold any excess reserves and households hold no currency.

Now suppose that the Fed increased the required reserves to 50.4.

As a result of this new policy, by how much has the money supply changed?

Hint