Suppose the Fed decided to sell $100 billion worth of government securities in the open market. Assume all payments are directly deposited into or withdrawn from the banking system. What impact would this action have on the economy? Specifically, answer the following questions. Instructions: Enter your responses as a whole number. If the lending capacity or aggregate demand falls be sure to include a negative sign (-) with your answer. b. By how much will the banking system’s lending capacity change if the reserve requirement is 20 percent? d. By how much will aggregate demand initially change if investors change their behavior because of this change in available credit?
Suppose the Fed decided to sell $100 billion worth of government securities in the open market. Assume all payments are directly deposited into or withdrawn from the banking system. What impact would this action have on the economy? Specifically, answer the following questions.
Instructions: Enter your responses as a whole number. If the lending capacity or aggregate demand falls be sure to include a negative sign (-) with your answer.
b. By how much will the banking system’s lending capacity change if the reserve requirement is 20 percent?
d. By how much will aggregate demand initially change if investors change their behavior because of this change in available credit?
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