This means that money multiplier is fixed and is equal to 3. The Fed's balance sheet is Federal Reserve Bank Assets Securities Gold $ 900 100 Liabilities Currency held by nonbank public Vault cash held by banks Reserve deposits Total liabilities $ 700 100 200 $1000 Total assets $1000 and the commercial banks' balance sheet is Consolidated Balance Sheet of Banks Liabilities Deposits $3000 Assets Vault cash Reserve deposits Loans Total assets $ 100 200 2700 $3000 Total liabilities $3000 If the Fed wants to increase money supply by 15%, then it has to buy government bonds in the amount
Suppose that for every open-market operation in the amount of $1, money supply increases by $3, i.e., an open-market purchase of $1 will increase money supply by $3 and an open-market sale of $1 will reduce money supply by $3. This means that money multiplier is fixed and is equal to 3. The Fed's
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