In 2010 M1 was $2 trillion Currency was $850 Million Travelers checks were $20 Billion Demand deposits were $1030 billion The fed decides to reduce the money supply by increasing the reserve requirement ratio from 0.11 to 0.12 Banks are loaned up and the amount of currency in the economy does not change. How much does the change in the reserve requirement change the money supply? Explain
In 2010 M1 was $2 trillion Currency was $850 Million Travelers checks were $20 Billion Demand deposits were $1030 billion The fed decides to reduce the money supply by increasing the reserve requirement ratio from 0.11 to 0.12 Banks are loaned up and the amount of currency in the economy does not change. How much does the change in the reserve requirement change the money supply? Explain
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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In 2010
M1 was $2 trillion
Currency was $850 Million
Travelers checks were $20 Billion
The fed decides to reduce the money supply by increasing the reserve requirement ratio from
0.11 to 0.12
Banks are loaned up and the amount of currency in the economy does not change.
How much does the change in the reserve requirement change the money supply? Explain.
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