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Question 1

Suppose the Fed decreases required reserve ratio.

As a result of this policy, what will happen to the money supply?

 

Suppose the Fed increases discount rate.

As a result of this policy, what will happen to the money supply?

 

Consider the following balance sheet for Bank of America.

AssetsLiabilities
Reserves345Deposits1500
Loans1155

Suppose that someone deposited $600 at Bank of America.

Given this data, what is the maximum amount by which the money supply will increase?


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