Suppose that the required reserve ratio on deposit is 20%, and the public’s currency holdings are constant. A 200$ million purchase of government securities in the open market by the central bank from an individual will i. _________ initial bank reserves by $______________. ii. _________ required reserves for the First Bank by $______________. iii. _________ excess bank reserves for the First Bank by $______________. iv. _________ total money supply by $______________.
2.1.Suppose that the
ii. _________ required reserves for the First Bank by $______________.
iii. _________
iv. _________ total money supply by $______________.
2.2 If the commercial banks hold demand deposit of $150,000, the required reserve ratio should be ___________ if the central bank would like to expand the money supply for another $150,000 at the maximum, given that the public’s currency holdings are constant.
2.3 Assuming the required reserve ratio is 20%, and bank reserves set at $100 billion, then the maximum amount of deposits commercial banks can hold would be $______________.
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