Suppose the Federal Reserve decided to purchase $40 billion worth of government securities in the open market. a. By how much will M1 change initially if the entire $40 billion is deposited into transactions accounts?
2
points
M1 will initially
[by:
billion
eBook
b. How will the lending capacity of the banking system be affected if the reserve requirement is 10 percent?
Print
Total lending capacity will
by
billion
References
c. How will banks induce investors to utilize this expanded lending capacity?
As the money supply increases interest rates will
and investors will want to borrow
funds
Mς
Graw
Hill
< Prey
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