Assume the money supply is $850 billion, total deposits are $500 billion and the required reserve-deposit...

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Assume the money supply is $850 billion, total deposits are $500 billion and the required reserve-deposit ratio is 10%, if the Central Bank purchases $60 million worth of Treasury bills, what is the greatest amount by which total money supply could change? Do you expect that money supply would actually change by that much? Find the maximum value of deposit multiplier for this economy. Explain, why this value is the maximum value.

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Answer 1

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