1. Suppose that the Fed conducts an open market purchase of $500 million. Answer the questions below, assuming that the required reserve ratio is 10%. Show all work. a) Illustrate impact this has on T-accounts of the Banking System and the FED b) State the exact change in R and MB [give # and directional change: rise of fall] c) Calculate the impact on Money Supply using the simple model (show work). [obtain # and state the directional change: rise of fall] d) Calculate the impact on Money Supply using the complex model (show work). [obtain # and state the directional change: rise of fall]
1. Suppose that the Fed conducts an open market purchase of $500 million. Answer the questions below, assuming that the required reserve ratio is 10%. Show all work. a) Illustrate impact this has on T-accounts of the Banking System and the FED b) State the exact change in R and MB [give # and directional change: rise of fall] c) Calculate the impact on Money Supply using the simple model (show work). [obtain # and state the directional change: rise of fall] d) Calculate the impact on Money Supply using the complex model (show work). [obtain # and state the directional change: rise of fall]
Chapter14: Banking And The Money Supply
Section: Chapter Questions
Problem 3.4P
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1. Suppose that the Fed conducts an open market purchase of $500 million. Answer the questions below, assuming that the
a) Illustrate impact this has on T-accounts of the Banking System and the FED
b) State the exact change in R and MB [give # and directional change: rise of fall] c) Calculate the impact on Money Supply using the simple model (show work). [obtain # and state the directional change: rise of fall]
d) Calculate the impact on Money Supply using the complex model (show work). [obtain # and state the directional change: rise of fall]
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