Assume the reserve ratio is 10% Formula: Potential Expansion Deposits = 1/Reserve Ratio x Excess Reserves...

Assume the reserve ratio is 10%

Formula: Potential Expansion Deposits = 1/Reserve Ratio x Excess Reserves

County National Bank

A	L
Reserves 20,000	100,000 Deposits

ER = ______________________ Potential Expansion _____________________

FED (Federal Reserve Bank) buys a $10,000 bond from the bank. What is the potential impact on MS (Money Supply)?

FED buys a $10,000 bond from a bank customer. What is the impact on MS? Is there a difference between 2 and 3? Why?
Assume the money supply rule. Growth in Q is 5%; growth in V is 2%. How much should the MS grow to keep P constant? Assume MV = PQ

Expert Solution

Rahul Sunny answered 8 months ago

Using a required reserve ratio of 10% and if banks keep no excess reserves, which of...

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Assume the reserve ratio is 10% Formula: Potential Expansion Deposits = 1/Reserve Ratio x Excess Reserves...

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