Answer to Question #108945 in Macroeconomics for vanessa

Question

Suppose the reserve ratio is 20 percent, banks do not hold any excess reserves, people hold only deposits and no currency. Then the Fed buys $10 million worth of government bonds from banks. By how much and what direction do reserves change?

Answer 1

answer: reserves will increase by $ 10 million;

the percentage of reservation will become more than 20%, which is impossible to say for sure, since there is no data on the money supply in the country.