1. current money supply is $4000. for each of the following state the money multiplier, monetary base, and by how much the fed must change the reserve requirement to achieve the desired change in the money supply. assume banks hold on excess reserves and individuals hold no money:
a. reserve requirement is currently 0.2, the fed wants to decrease the money supply by $800
b. reserve requirement is .5, the fed wants to increase money supply by $1000
c. reserve requirement is currently .25, the fed wants to increase money supply by $1000
2. current money supply is $10,000. state the money multiplier monetary base, and what open market operation the fed would have to take to achieve the desired change in the money supply. assume banks hold no excess reserves and individuals hold no money
a. reserve requirement is .1, feds want to decrease money supply by $800
b. reserve requirement is .5, fed wants to increase money supply by $1000
c. reserve requirement is .4, fed wants to increase money supply by $1000
3. current money supply is 8000. state money multiplier, monetary base, and how the fed would have to change the discount rate to achieve the desired change in the money supply. assume that for every percentage point decline in the discount rate banks borrow an additional $50. assume banks hold no excess reserves and individuals hold no money
a. reserve requirement is .1, fed wants to increase money supply by $600
b. reserve requirement is .5, fed wants to increase money supply by $400
c. reserve requirement is .4, fed wants to decrease money supply by $250
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