-Based on the above table, an open market operation in which the Fed purchased $200,000 of government securities would

Question

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When the Fed purchases $200,000 of government securities, it injects that amount into the banking system. This increases reserves, which can then be multiplied throughout the banking system due to the fractional reserve banking system. The maximum potential expansion of the money supply is determined by the money multiplier, which is the reciprocal of the reserve requirement. If we assume a 10% reserve requirement (not specified in the question but commonly used for illustrative purposes), the money multiplier would be 10 (1/0.10). Therefore, a $200,000 increase in reserves could lead to a maximum potential expansion of the money supply of $2 million ($200,000 * 10).

-Based on the Above Table, an Open Market Operation in Which