Suppose the Federal Reserve increases the amount of reserves by $100 million and the total money supply increases by $400 million. Instructions: Enter your answers as a whole number.            a.  What is the money multiplier?                  ______             b.   Using the money multiplier from part a, how much will the money supply change if the Federal Reserve increases reserves by $40 million?                $ _______ million

Economics For Today
10th Edition
ISBN:9781337613040
Author:Tucker
Publisher:Tucker
Chapter25: Money Creation
Section: Chapter Questions
Problem 8SQP
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Suppose the Federal Reserve increases the amount of reserves by $100 million and the total money supply increases by $400 million.

Instructions: Enter your answers as a whole number.

           a.  What is the money multiplier?

                 ______

 

          b.   Using the money multiplier from part a, how much will the money supply change if the Federal Reserve increases reserves by $40 million?

               $ _______ million

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