If the required reserve rate is ten percent and banks do not hold any excess reserves and there are no changes in currency holdings, a $1 million open market purchase by the Fed will result in what change in loans?

Question

Quizplus · Accepted Answer

The required reserve ratio is 10%, so if the Fed purchases $1 million in bonds, banks are able to lend out an additional $10 million. Therefore, there is an increase in loans of $10 million.

If the Required Reserve Rate Is Ten Percent and Banks