Business, 06.05.2020 01:38 ShundaBaker

Suppose the Federal Reserve wants to increase the money supply by increasing the lending potential of commercial banks. Assume the current reserve requirement for commercial banks is 8 percent. Now suppose the Fed wants the lending potential to increase by $250 billion, and it plans to use open-market operations to accomplish this goal. Instructions: Enter your answer as a whole number. a. If sales or purchases of government securities are the only instrument used in the open-market operations, the Fed will need to government securities in the total amount of $ billion. b. The Fed may also opt to use some amount of to effectively commercial banks rather than permanently transfer ownership of the securities in order to obtain its goal.

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