Answer to Question #38086 in Macroeconomics for Helen K.
Suppose the Fed sells $5 million worth of bonds to Econobank.
What happens to the reserves of the bank?
What happens to the money supply in the economy as a whole if the reserve requirement is 10%, all payments are made by check, and there is no net drain into currency?
How would your answer in part b be affected if you knew that some people involved in the money creation process kept some of their funds as cash?
Going back to school after summer vacation is not the easiest thing to do. In fact, it takes more mental…
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