The initial condition of the banking system is as follows: $150 billion in reserve, $1,350 billion in loans and investments, and 1,500 billion in deposits. The required reserve is 10%. The Fed buys $100 billion government securities using open market operation. What is the maximum amount of loans in the banking system as a result of such Fed operation?
The initial condition of the banking system is as follows: $150 billion in reserve, $1,350 billion in loans and investments, and 1,500 billion in deposits. The required reserve is 10%. The Fed buys $100 billion government securities using open market operation. What is the maximum amount of loans in the banking system as a result of such Fed operation?
Chapter19: Money Creation
Section: Chapter Questions
Problem 14SQ
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The initial condition of the banking system is as follows: $150 billion in reserve, $1,350 billion in loans and investments, and 1,500 billion in deposits. The
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