suppose the federal reserve injects 100 million into financial system with a 25% required reserves ratio. what is the maximum total increase in the money supply from this policy?
A- $100 m
B-$250 m
C-$400 m
D- $500m
Increase in money supply=(1/reserve ratio)*the amount fed injects in the economy.
I/RR=1/25%
Money multiplier=1/RR=4
increase in money supply=4*100=400
Answer-C
suppose the federal reserve injects 100 million into financial system with a 25% required reserves ratio....
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