Assume no change in currency holdings as deposits change. A banking system with target reserve ratio is 0.05 starts with no excess reserves. If the central bank purchases $200 in government bonds from commercial banks, what will be the ultimate change in money supply (when banks return to having no excess reserves)? (Round to two decimal places and do not enter the currency symbol. If your answer is $6.114, enter 6.11. If your answer is $6.115, enter 6.12. If appropriate, remember to enter the - sign.)

ECON MACRO
5th Edition
ISBN:9781337000529
Author:William A. McEachern
Publisher:William A. McEachern
Chapter14: Banking And The Money Supply
Section: Chapter Questions
Problem 2.3P
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Assume no change in currency holdings as deposits change. A banking system
with target reserve ratio is 0.05 starts with no excess reserves. If the central
bank purchases $200 in government bonds from commercial banks, what will be
the ultimate change in money supply (when banks return to having no excess
reserves)?
(Round to two decimal places and do not enter the currency symbol. If your
answer is $6.114, enter 6.11. If your answer is $6.115, enter 6.12. If appropriate,
remember to enter the sign.)
-
Transcribed Image Text:Assume no change in currency holdings as deposits change. A banking system with target reserve ratio is 0.05 starts with no excess reserves. If the central bank purchases $200 in government bonds from commercial banks, what will be the ultimate change in money supply (when banks return to having no excess reserves)? (Round to two decimal places and do not enter the currency symbol. If your answer is $6.114, enter 6.11. If your answer is $6.115, enter 6.12. If appropriate, remember to enter the sign.) -
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