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Assume that the banking system is loaned up and that any open-market purchase by the Fed directly increases reserves in the banks. If the required reserve ratio is 0.2, by how much could the money supply
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Assume that the banking system is loaned up and that any open-market purchase by the Fed directly increases reserves in the banks. If the required reserve ratio is 0.2, by how much could the money supply expand if the Fed purchased $2 billion worth of bonds?

User Gorsky
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Answer:

Money Supply Would Expand by = 2 billion /0.2 = $10 billion .

Step-by-step explanation:

User Ben Wells
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