Consider an open market purchase by the Fed of $3 billion of Treasury bonds. What is the impact of the purchase on the bank from which the Fed bought the securities? Compute the impact on M1 assuming that: (1) the required reserve ratio is 10 percent; (2) the bank does not wish to hold excess reserves; and (3) the public does not wish to hold currency

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Consider an open market purchase by the Fed of $3 billion of Treasury bonds. What is the impact of the purchase on the bank from which the Fed bought the securities? Compute the impact on M1 assuming that: (1) the required reserve ratio is 10 percent; (2) the bank does not wish to hold excess reserves; and (3) the public does not wish to hold currency.

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