If the Fed buys $150 billion of U.S.bonds in the open market and the reserve requirement is 5 percent,M1 will eventually

Question

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When the Fed buys bonds in the open market, it increases the reserves of the banking system. With a 5% reserve requirement, each dollar of reserves can support $20 of deposits because 1/0.05 = 20. Therefore, a $150 billion increase in reserves can increase M1 by 20 times that amount, or $3,000 billion.

If the Fed Buys $150 Billion of U