Suppose that the reserve requirement is 5% and that commercial banks are holding excess reserves. If the Federal Reserve conducts an open-market purchase of $10 billion, the money supply will grow by -1- O None of these answers is correct. O more than $200 billion O less than $50 billion O less than $200 billion

Suppose that the reserve requirement is 5% and that commercial banks are holding excess reserves. If the Federal Reserve conducts an open-market purchase of $10 billion, the money supply will grow by -1- O None of these answers is correct. O more than $200 billion O less than $50 billion O less than $200 billion

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter11: The Monetary System

Section: Chapter Questions

Problem 9PA

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. Suppose that the T-account for Nan Bank Inc. is as follows:Assets LiabilitiesReserves $100,000Loans $400,000 Deposits $500,000. If the Bank of Canada requires banks to hold 5 percent of deposits reserves, how much in excess reserves does Nan Bank Inc. now hold?Assume that all other banks hold only the required amount of reserves. IfNan Bank Inc. decides to reduce its reserves to only the required amount, byhow much would the economy's money supply increase?
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