The Fed purchases $1 million of U.S. government securities from First Bank. The required reserve ratio is 10 percent, the currency-deposit ratio is 5 percent, and banks loan all excess reserves. The total increase in monetary base is _____ and the total increase in money supply (M1) is _____.O. $1 million; $3 millionO. $3 million; $1 milionO. $1million; $7 millionO. $7 million: $1 million 7. Money MultiplierThe Fed purchases $1 million of U.S. government securities from First Bank. The required reserve ratio is 10 percent, the currency-deposit ratio is 5percent, and banks loan all excess reserves. The total increase in monetary base is and the total increase in money supply (M1) isO $1 million; $3 millionO $3 million; $1 million$1 million; $7 millionO $7 million; $1 million

Monetary base is the sum of currency in circulation and reserve. Money multiplier is given by the…

Answered: The Fed purchases $1 million of U.S.…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The Fed purchases $1 million of U.S. government securities from First Bank. The required reserve ratio is 10 percent, the currency-deposit ratio is 5 percent, and banks loan all excess reserves. The total increase in monetary base is _____ and the total increase in money supply (M1) is _____.

O. $1 million; $3 million
O. $3 million; $1 milion
O. $1million; $7 million
O. $7 million: $1 million

7. Money Multiplier
The Fed purchases $1 million of U.S. government securities from First Bank. The required reserve ratio is 10 percent, the currency-deposit ratio is 5
percent, and banks loan all excess reserves. The total increase in monetary base is and the total increase in money supply (M1) is
O $1 million; $3 million
O $3 million; $1 million
$1 million; $7 million
O $7 million; $1 million

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