contestada

Suppose that the Federal Reserve buys $400 billion worth of government securities from the public. If the required reserve ratio is 20 percent, the maximum increase in the money supply is

Respuesta :

abiolataiwo2015

If the required reserve ratio is 20 percent, the maximum increase in the money supply is $2,000 billion.

Money supply

First step

Multiplier=1/Reserve ratio

Multiplier=1/0.20

Multiplier=5

Second step

Increase in money supply=Multiplier×Federal reserve

Increase in money supply=5×$400

Increase in money supply=$2,000 billlion

Therefore If the required reserve ratio is 20 percent, the maximum increase in the money supply is $2,000 billion.

Learn more about money supply here:https://brainly.com/question/3625390

Otras preguntas