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Elizabeth Elvienna29118060M5006 - Assignment 6B1.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?