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The FOMC has instructed the FRBNY Trading Desk to purchase $540 million in U.S. Treasury securities. The Federal Reserve has currently set the reserve requirement at 4 percent of transaction deposits. Assume U.S. banks withdraw all excess reserves and give out loans. b. e. Assume also that borrowers eventually return all of these funds to their banks in the form of transaction deposits. What is the full effect of this purchase on bank deposits and the money supply? b. What is the full effect of this purchase on bank deposits and the money supply if borrowers return only 96 percent of these funds to their banks in the form of transaction deposits? (For all requirements, enter your answers in billions. Round your finel answers to 2 decimal places. (i.e., 5,500,000,000 should be entered as 5,50).) in bank deposits and money supply in bank deposits and money supply Amount billion billion

The FOMC has instructed the FRBNY Trading Desk to purchase $540 million in U.S. Treasury securities. The Federal Reserve has currently set the reserve requirement at 4 percent of transaction deposits. Assume U.S. banks withdraw all excess reserves and give out loans. b. e. Assume also that borrowers eventually return all of these funds to their banks in the form of transaction deposits. What is the full effect of this purchase on bank deposits and the money supply? b. What is the full effect of this purchase on bank deposits and the money supply if borrowers return only 96 percent of these funds to their banks in the form of transaction deposits? (For all requirements, enter your answers in billions. Round your finel answers to 2 decimal places. (i.e., 5,500,000,000 should be entered as 5,50).) in bank deposits and money supply in bank deposits and money supply Amount billion billion

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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The FOMC has instructed the FRBNY Trading Desk to purchase $540 million in U.S. Treasury securities. The Federal Reserve has currently set the reserve requirement at 4 percent of transaction deposits. Assume U.S. banks withdraw all excess reserves and give out loans. b. a. Assume also that borrowers eventually return all of these funds to their banks in the form of transaction deposits. What is the full effect of this purchase on bank deposits and the money supply? b. What is the full effect of this purchase on bank deposits and the money supply if borrowers return only 96 percent of these funds to their banks in the form of transaction deposits? (For all requirements, enter your answers in billions. Round your final answers to 2 decimal places. (i.e., 5,500,000,000 should be entered as 5.50).) in bank deposits and money supply in bank deposits and money supply Amount billion billion M2
Transcribed Image Text:The FOMC has instructed the FRBNY Trading Desk to purchase $540 million in U.S. Treasury securities. The Federal Reserve has currently set the reserve requirement at 4 percent of transaction deposits. Assume U.S. banks withdraw all excess reserves and give out loans. b. a. Assume also that borrowers eventually return all of these funds to their banks in the form of transaction deposits. What is the full effect of this purchase on bank deposits and the money supply? b. What is the full effect of this purchase on bank deposits and the money supply if borrowers return only 96 percent of these funds to their banks in the form of transaction deposits? (For all requirements, enter your answers in billions. Round your final answers to 2 decimal places. (i.e., 5,500,000,000 should be entered as 5.50).) in bank deposits and money supply in bank deposits and money supply Amount billion billion M2
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