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Macroeconomics 6th Edition by Robert Hall,Marc Lieberman
Edition 6ISBN: 978-1111822354Macroeconomics 6th Edition by Robert Hall,Marc Lieberman
Edition 6ISBN: 978-1111822354 Exercise 9
For each of the following situations, determine whether the money supply will increase, decrease, or stay the same.
a. Depositors become concerned about the safety of depository institutions.
b. The Fed lowers the required reserve ratio. (Assume banks never hold excess reserves.)
c. The economy enters a recession and banks have a hard time finding credit-worthy borrowers.
d. The Fed sells $100 million of bonds to First National Bank of Ames, Iowa; banks never hold excess reserves; and the public doesn't change its cash holdings.
e. The Fed buys $100 million of bonds from First National Bank of Ames, Iowa, but the interest rate banks can earn from lending is the same as the interest rate the Fed pays on reserves.
a. Depositors become concerned about the safety of depository institutions.
b. The Fed lowers the required reserve ratio. (Assume banks never hold excess reserves.)
c. The economy enters a recession and banks have a hard time finding credit-worthy borrowers.
d. The Fed sells $100 million of bonds to First National Bank of Ames, Iowa; banks never hold excess reserves; and the public doesn't change its cash holdings.
e. The Fed buys $100 million of bonds from First National Bank of Ames, Iowa, but the interest rate banks can earn from lending is the same as the interest rate the Fed pays on reserves.
Explanation
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The money supply changes according to ch...
Macroeconomics 6th Edition by Robert Hall,Marc Lieberman
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