Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required reserve ratio is 10.00 %, and the Federal Reserve wants to increase the money supply by $20.00 million, the Fed would need to make an open market purchase of $ ___ million. (Insert your answer in millions, and round to two decimal places.) Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required reserve ratio is 25.00%, and the Federal Reserve wants to decrease the money supply by $70.00 million, the Fed would need to make an open market sale of $ ______ million. (Insert your answer in millions, and round to two decimal places.) Suppose that banks decide to hold excess reserves. In order for the Federal Reserve to change the money supply by the same amounts as in parts 1 and 2, it would need to make Choose one: A. a larger open market purchase and a larger open market sale. B. a smaller open market purchase but a larger open market sale. C. a larger open market purchase but a smaller open market sale. D. a smaller open market purchase and a smaller open market sale.
Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required reserve ratio is 10.00 %, and the Federal Reserve wants to increase the money supply by $20.00 million, the Fed would need to make an open market purchase of $ ___ million. (Insert your answer in millions, and round to two decimal places.) Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required reserve ratio is 25.00%, and the Federal Reserve wants to decrease the money supply by $70.00 million, the Fed would need to make an open market sale of $ ______ million. (Insert your answer in millions, and round to two decimal places.) Suppose that banks decide to hold excess reserves. In order for the Federal Reserve to change the money supply by the same amounts as in parts 1 and 2, it would need to make Choose one: A. a larger open market purchase and a larger open market sale. B. a smaller open market purchase but a larger open market sale. C. a larger open market purchase but a smaller open market sale. D. a smaller open market purchase and a smaller open market sale.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If
the required reserve ratio is 10.00 %, and the Federal Reserve wants to increase the money supply by
$20.00 million, the Fed would need to make an open market purchase of $ ___ million. (Insert your
answer in millions, and round to two decimal places.)
Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If
the required reserve ratio is 25.00%, and the Federal Reserve wants to decrease the money supply by
$70.00 million, the Fed would need to make an open market sale of $ ______ million. (Insert your
answer in millions, and round to two decimal places.)
Suppose that banks decide to hold excess reserves. In order for the Federal Reserve to change the money
supply by the same amounts as in parts 1 and 2, it would need to make
Choose one:
A. a larger open market purchase and a larger open market sale.
B. a smaller open market purchase but a larger open market sale.
C. a larger open market purchase but a smaller open market sale.
D. a smaller open market purchase and a smaller open market sale.
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