1suppose the fed decides to stimulate the economy assume

Reference no: EM13377168

1.Suppose the Fed decides to stimulate the economy. Assume there is no cash leakage and required reserve ratio is 25% now, and banks have no excess reserves.

A. Show how the Fed would increase M1 by 1 million dollars by changing the reserve ratio.
B. Show how the Fed would increase M1 by 1 million dollars through open market operation. Image text transcribed for accessibility: Suppose the Fed decides to stimulate the economy. Assume there is no cash leakage and required reserve ratio is 25% now, and banks have no excess reserves. Show how the Fed would increase M1 by 1 million dollars by changing the reserve ratio. Show how the Fed would increase M1 by 1 million dollars through open market operation.

Reference no: EM13377168

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