Assume that individuals do not hold any cash and the banks do not hold any excess reserves. If the Federal Reserve buys $100 of government securities and the money supply increases by $10,000, then the reserve requirement on banks is _____ percent, and the money multiplier is:

Question

Quizplus · Accepted Answer

The reserve requirement is 1% because $100 in reserves leads to a $10,000 increase in the money supply, indicating a money multiplier of 100.

Assume That Individuals Do Not Hold Any Cash and the Banks