Since October 2008, the Federal Reserve has paid interest on excess reserves held by banks. Under these circumstances, the Fed buys Treasury securities worth $200 million from a bank, how will the money supply be affected? Assume that the required reserve ratiois 10% and that all currency is deposited into the banking system Choose one: A The money supply will increase by less than $2 bilion B. The money supply will not change at all C. The money supply will increase by $2 billion D. The money supply will increase by more than $2 billion
Since October 2008, the Federal Reserve has paid interest on excess reserves held by banks. Under these circumstances, the Fed buys Treasury securities worth $200 million from a bank, how will the money supply be affected? Assume that the required reserve ratiois 10% and that all currency is deposited into the banking system Choose one: A The money supply will increase by less than $2 bilion B. The money supply will not change at all C. The money supply will increase by $2 billion D. The money supply will increase by more than $2 billion
Chapter25: Money Creation
Section: Chapter Questions
Problem 8SQP
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