What is the maximum amount of money that can be created in the banking system by this purchase?
messiah asked:
If all banks are meeting their reserve requirement of 20 percent and the Fed buys $35,000,000 of securities from these banks, what is the maximum amount of money that can be created in the banking system by this purchase?
Maximum increase in money =
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If all banks are meeting their reserve requirement of 20 percent and the Fed buys $35,000,000 of securities from these banks, what is the maximum amount of money that can be created in the banking system by this purchase?
Maximum increase in money =
July 31st, 2009 at 10:34 am
The maximum amount of money that can be created is (1/0.2) x $35,000,000 = $175,000,000.
Just use the required reserve ratio.
August 2nd, 2009 at 3:36 am
The maximum increase in money supply = (1/.20) 35,000,000= $175,000,000