What quantities of bonds does the fed need to buy or sell

Reference no: EM133339732

Question: Assume that the reserve requirement ratio is 5%. Also assume that banks do not hold excess reserves and there is no cash held by the public (i.e. people keep making new deposits). The Fed Reserve decide that it wants to increase the money supply by $50 million dollars eventually. A) If the Fed is using open-market operations to change money supply, will it buy or sell government bonds? B) What quantities of bonds does the Fed need to buy or sell initially to accomplish the goal? (Show your work)

Reference no: EM133339732

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