Using the simply money multiplier model, what quantity of securities must the Federal Reserve purchase to...

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Using the simply money multiplier model, what quantity of securities must the Federal Reserve purchase to generate an increas

L > 5. During open market operations the Federal Reserve Bank purchases $120 million dollars worth of securities. The estimat

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Answer 1

Answer #1

Minimum required reserves = Required Reserve Ratio * Checkable deposits

Where,

Minimum required reserves are the securities must be purchased by Federal Reserve =?

Required Reserve Ratio =4%

Checkable deposits = $22,500

Therefore,

Minimum required reserves = 4% * $22,500 = 900

Therefore correct answer is option: 900

5. Minimum required reserves = Required Reserve Ratio * Checkable deposits

Where,

Minimum required reserves are the securities must be purchased by Federal Reserve =$120 million

Required Reserve Ratio =?

Checkable deposits = $750 million

Therefore,

$120 million = Required Reserve Ratio * $750 million

Required Reserve Ratio =$120 million /$750 million

= 0.16 or 16%

Therefore correct answer is option: 16%

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Answer 2

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