What is the maximum change in total deposits at financial institutions if the Fed sells $120...

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What is the maximum change in total deposits at financial institutions if the Fed sells $120...

What is the maximum change in total deposits at financial institutions if the Fed sells $120 billion of government securities to dealers, and the reserve requirement applicable to all deposits is 10%?

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Answer 1

Answer #1

Reserve requirement on DEPOSITS is 10%

As the Total Securities Sold to DEALERS is $120 Billions, $120 Billion is 110%, out of which 100% will be Deposits and 10% will be Reserve.

Maximum Change in Deposits = 120/110% = $109.0909 Billions

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Answer 2

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What is the maximum change in total deposits at financial institutions if the Fed sells $120...

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