Assignment 6B_Elizabeth Elvienna_29118060.pdf - Elizabeth Elvienna 29118060 M5006 Assignment 6B 1 Suppose banks hold no excess reserves the reserve

Assignment 6B_Elizabeth Elvienna_29118060.pdf - Elizabeth...

This preview shows page 1 - 3 out of 4 pages.

Elizabeth Elvienna 29118060 M5006 - Assignment 6B 1.Suppose banks hold no excess reserves, the reserve requirement is 10%, and the cash-to-deposit ratio is 10%.a.If banks have $10 million in reserves what will the money supply be? b.How will your answer to (a) change if the Fed increases the reserve requirement to20%? 2.Imagine you are a Federal Reserve board governor and you are examining the economy.You discover that the money supply is currently $2,000,000, that banks have $1,000,000 inreserves. You want to increase the money supply by $500,000 using an open marketoperation. What would you do?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture