assume that the reserve requirement is 20 percent

Option 2 is correct Money supply would increase by less $5 millions Explanation Increase in 1. b. an increase in the money supply of less than $5 million D. money supply will rise. Assume that the reserve requirement ratio is 20 percent. Get access to this video and our entire Q&A library, Effects of Fiscal & Monetary Policy on Personal Finance. Using a required reserve ratio of 10% and assuming that banks keep no excess reserves, what is the value of government securities the Fed must purchase if it wants to increase the money supply by $2 million? b. excess reserves of banks increase. How can the Fed use open market operations to accomplish this goal? The Fed aims to decrease the money supply by $2,000. "Whenever currency is deposited in a commercial bank, cash goes out of Since excess reserves are zero, so total reserves are required reserves. Assume that the reserve requirement is 5 percent. If the Federal Reserve buys $5,000 worth of bonds, the largest possible increase in the money supply is $25,000 If someone deposits in a bank $5,000 that she had been hiding in her cookie jar, the largest possible increase in the money supply is $ All other things equal, if the Federal Reserve buys $5,000 worth of bonds, the money supply will . DepreciationExpenseFeesEarnedInsuranceExpenseMiscellaneousExpense$8,000425,0001,5003,250RentExpenseSalariesExpenseSuppliesExpenseUtilitiesExpense$60,500213,8002,75023,200, a. P(80

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