Suppose the reserve requirement for the United States is 15%. Instructions: Roun

Question

Suppose the reserve requirement for the United States is 15%.

Instructions: Round your answers to the nearest whole number.

a. Suppose the Federal Reserve wants to increase the money supply. What should it do to accomplish this goal?

   The Fed could make an (open market sale / open market purchase) of $30 billion, resulting in a total increase in the money supply of $______

b. Now suppose the Fed wants to decrease the money supply. What should it do to accomplish this goal?

     The Fed could make an (open market sale/ open market purchase) of $40 billion, resulting in a total decrease in the money supply of $ ______

Explanation / Answer

Open Market Purchase, Increase in Money Supply=$30/.15=$200 Billion

Open Market Sale,Decrease=$40/.15=$266.67

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