The banking system currently has $200 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 4 percent. If the Fed raises the reserve requirement to 10 percent and at the same time buys $50 billion worth of bonds, then by how much does the money supply change?
a. It rises by $600 billion.
b. It rises by $125 billion.
c. It falls by $2,500 billion.
d. None of the above is correct.
c
Economics
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Which of the following approaches should the Fed use if it experiences large lags and mistakes in monetary policy?
A. Discretionary policy B. An eclectic approach C. Fixed rules D. Fiscal policy
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Refer to Figure 9-3. What is the area of consumer surplus after the imposition of the quota?
A) A B) G + H C) A + G + H D) G + H + E + I+ J + M
Economics