If the Federal Reserve sells $1,500 in bonds and the resulting money supply change is $7,500,what is the required reserve ratio?

Question

Quizplus · Accepted Answer

The money supply change is 5 times larger than the amount of bonds sold, which means the money multiplier is 5. Given that the money multiplier is equal to 1/reserve ratio, we can solve for the reserve ratio: 5 = 1/reserve ratio, which gives a reserve ratio of 0.2. Therefore, the answer is choice B.

If the Federal Reserve Sells $1,500 in Bonds and the Resulting