Question

5. The current level of money supply in the economy is 10million USD. However the economy needs 50million USD. If the reserve requirement is 15%, what the government should make to meet the amount of money supply its economy needs? (Use open market operation concept). ​

Answer 1

Answer:Now the reserve ratio for the bank is 20/90=22.2%. Then the bank has excess reserves and needs not to recall loans and reduce deposits.