ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Table 29-1
Effects of an open-market transaction on the balance sheets of Banks and the Fed (in millions of dollars)
Banks
Federal Reserve System
Assets
Liabilities
Assets
Liabilities
Bank Reserves:
Reserves: +$20
U.S. Gov't Sec. +$20
+$20
U.S. Gov't
Securities:-$20
In Table 29-1, if the required reserve ratio is 5 percent, what will happen to the money supply? Use the
oversimplified money multiplier in your calculations.
The money supply will not change.
The money supply will decrease by $400 million.
The money supply will decrease by $100 million.
The money supply will increase by $400 million.
The money supply will increase by $20 million.
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Transcribed Image Text:Table 29-1 Effects of an open-market transaction on the balance sheets of Banks and the Fed (in millions of dollars) Banks Federal Reserve System Assets Liabilities Assets Liabilities Bank Reserves: Reserves: +$20 U.S. Gov't Sec. +$20 +$20 U.S. Gov't Securities:-$20 In Table 29-1, if the required reserve ratio is 5 percent, what will happen to the money supply? Use the oversimplified money multiplier in your calculations. The money supply will not change. The money supply will decrease by $400 million. The money supply will decrease by $100 million. The money supply will increase by $400 million. The money supply will increase by $20 million.
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