Given that the required reserve ratio is 25%. If the Fed sells $5 million worth of...
Given that the required reserve ratio is 25%. If the Fed sells $5 million worth of government securities to the Bank of America, the change in the money supply will, at most, be
Homework Answers
Answer
A sell of securities means securities will go in the economy and money is taken out so the money supply decreases
the total change in money supply =sell amount /required ratio
=5/0.25
=$20 million
the money supply will decrease by $20 million
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