Reference no: EM13870247
The required reserve ratio (m) is 10%. Wilber National Bank has no excess reserves.
A. The Federal Reserve Bank then buys (purchases) $250,000 of U.S. government securities on the open market from Mr. X who has his checking account at Wilber National Bank. Show how you determine your answer and indicate the numerical effect this open market purchase will have on the amount of Wilber National Bank's
1) reserves:
2) excess reserves:
3) required reserves:
B. How much may Wilber National Bank now lend out?
C. What is the potential maximum change in the money supply as a result of this open market operation?
(Show how you determine your answer.)
D. Explain why the resultant change in the money supply may actually be less than the answer you provided in part C.
E. If the Federal Reserve Bank had purchased the U.S. government securities directly from Wilber National Bank instead of from Mr. X, what would the numerical effect have been on Wilber National Bank's
1) reserves:
2) excess reserves:
3) required reserves:
F. Under which economic situation (recession or inflation) would the Federal Reserve Bank buy (purchase) U.S. government securities. Briefly explain why.
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: A. The Federal Reserve Bank then buys (purchases) $250,000 of U.S. government securities on the open market from Mr. X who has his checking account at Wilber National Bank. Show how you determine your answer and indicate the numerical effect this op..
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