Suppose the fed decides to stimulate the economy

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Suppose the Fed decides to stimulate the economy. Assume there is no cash leakage and required reserve ratio is 20% 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: EM131159478

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