If the Required Reserve Ratio Is 10% and the Fed

question 54

Essay

If the required reserve ratio is 10% and the Fed purchases $20 million worth of securities,what is the simple deposit multiplier and what happens to the amount of deposits in the banking system? Assume that banks do not hold excess reserves and the public does not change its currency holdings.

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Definitions:

Thigh

The part of the human leg between the hip and the knee.

Abdominal Cavity

The space in the human body that houses major organs of digestion, excretion, and reproduction.

Body Cavities

Hollow spaces within the human body that house organs, including the thoracic, abdominal, and pelvic cavities.

Abdominal Cavity

A large body cavity in humans that houses many vital organs under its muscular wall.