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Suppose that the required reserve ratio (R) is 24 percent and that banks do not hold any excess reserves.

What is money multiplier, given this situation?

Hint

Suppose that the Fed conducts a $390 million open market purchase of government bonds.

In addition, suppose that the required reserve ratio is 48 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 $390 million of government bonds.

In addition, suppose that the required reserve ratio (R) is 42 percent and that banks do not hold any excess reserves.

What is money multiplier?

Hint

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

In addition, suppose that the required reserve ratio is 29 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 $1131 billion.

Assume also that required reserves are 39 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 $414 billion.

Assume also that required reserves are 23 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 18.4.

What is the new multiplier?

Hint

Assume that the banking system has total reserves of $465 billion.

Assume also that required reserves are 31 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 24.8.

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 $456 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 decreased the required reserves to 19.2.

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 $860 billion.

Assume also that required reserves are 43 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 $203 billion.

Assume also that required reserves are 7 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 8.4.

What is the new multiplier?

Hint

Assume that the banking system has total reserves of $216 billion.

Assume also that required reserves are 8 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 9.6.

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 $648 billion.

Assume also that required reserves are 27 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 32.4.

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

Hint