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Suppose that the required reserve ratio (R) is 19 percent and that banks do not hold any excess reserves.

What is money multiplier, given this situation?

Hint

Suppose that the Fed conducts a $160 million open market purchase of government bonds.

In addition, suppose that the required reserve ratio is 10 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 $250 million of government bonds.

In addition, suppose that the required reserve ratio (R) is 48 percent and that banks do not hold any excess reserves.

What is money multiplier?

Hint

Suppose that the Fed sells $290 million 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 change?

Hint

Assume that the banking system has total reserves of $832 billion.

Assume also that required reserves are 32 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 $806 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 decreased the required reserves to 24.8.

What is the new multiplier?

Hint

Assume that the banking system has total reserves of $630 billion.

Assume also that required reserves are 35 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 28.

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 $234 billion.

Assume also that required reserves are 13 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 10.4.

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 $276 billion.

Assume also that required reserves are 23 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 $496 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 increased the required reserves to 37.2.

What is the new multiplier?

Hint

Assume that the banking system has total reserves of $558 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 increased the required reserves to 37.2.

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 $399 billion.

Assume also that required reserves are 21 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 25.2.

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

Hint