EBK THE ECONOMICS OF MONEY, BANKING AND
EBK THE ECONOMICS OF MONEY, BANKING AND
4th Edition
ISBN: 8220100668203
Author: Mishkin
Publisher: PEARSON
Question
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Chapter 17, Problem 9Q
To determine

To the effect on the money supply when FED buys bonds worth $100 million from public and the required reserve ratio is lowered.

Given:

$100 million worth bonds are bought by FED from public.

Concept Introduction:

The currency of circulation plus the currency in banking reserves is the monetary base. Money supply applies to the monetary sum, which is Fed’s narrow money measure.

The fixed portion of deposits, the rate which is decided by the central bank, which the banks have to maintain with the Central Bank, is called the reserve ratio.

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