Ask Question
16 August, 16:49

Suppose the federal reserve sets the reserve requirement at 8%, banks hold no excess reserves, and no additional currency is held. a. what is the money multiplier? instructions: round your answer to 1 decimal place. b. how much will the total money supply change by if the federal reserve changes the amount of reserves by - $70 million? instructions: include a negative sign (-) if necessary.$millionc. suppose the federal reserve wants to increase the total money supply by $400 million. how much should the federal reserve increase reserves to achieve this goal?

+2
Answers (1)
  1. 16 August, 19:09
    0
    a. Money multiplier = 1/R, where R is reserve ratio (given, 8% = 0.08) So, money multiplier = 1/0.08 = 12.5 (which has 1 decimal place) b. Change in money supply = change in amount * money multiplier = - $70 M * 12.5 = - $875 million (negative sign indicates decrease in money supply) c. Required increase in reserve = (Required increase in money supply) / (money multiplier) = $400M/12.5 = $32 million So, amount of $32 million should be increased to achieve the goal
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Suppose the federal reserve sets the reserve requirement at 8%, banks hold no excess reserves, and no additional currency is held. a. what ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers