Worth of government securities in the open market

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Reference no: EM13815525

Suppose the Federal Reserve’s decided to purchase $20 billion worth of government securities in the open market.

a) by how much will M1 change initially?

b) how will the lending capacity of the banking system be affected if the reserve requirement is 10 percent?

c) how will bank induce investors to utilize this expanded lending capacity?

Reference no: EM13815525

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