Suppose the Federal Reserve decided to purchase $50 billion worth of government securities in the open market. Instructions: Enter your responses as a whole number a. By how much will MT change initially if the entire $50 billion is deposited into transactions accounts? M1 will initially [Click to select by S billion. b. How will the lending capacity of the banking system be affected if the reserve requirement is 10 percent? Total lending capacity will Click to select) by $4billion c. How will banks induce investors to utilize this expanded lending capacity? As the money supply increases, interest rates will (Click to select and investors will want to borrow [icles to select) funds

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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M10
Suppose the Federal Reserve decided to purchase $50 billion worth of government securities in the open market.
Instructions: Enter your responses as a whole number.
a. By how much will M1 change initially if the entire $50 billion is deposited into transactions accounts?
M1 will initially (Click to select
by S
billion.
b. How will the lending capacity of the banking system be affected if the reserve requirement is 10 percent?
Total lending capacity will Click to select) by $4 billion
c. How will banks induce investors to utilize this expanded lending capacity?
As the money supply increases, interest rates will (Click to select and investors will want to borrow [Click to select)
funds
Transcribed Image Text:Suppose the Federal Reserve decided to purchase $50 billion worth of government securities in the open market. Instructions: Enter your responses as a whole number. a. By how much will M1 change initially if the entire $50 billion is deposited into transactions accounts? M1 will initially (Click to select by S billion. b. How will the lending capacity of the banking system be affected if the reserve requirement is 10 percent? Total lending capacity will Click to select) by $4 billion c. How will banks induce investors to utilize this expanded lending capacity? As the money supply increases, interest rates will (Click to select and investors will want to borrow [Click to select) funds
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