Scenario B: So you decide to inject $100 billion in reserves via open market pur

Question

Scenario B: So you decide to inject $100 billion in reserves via open market purchases with phone in hand. Recall, the Chair said to watch that multiplier and so you start making some calls. Just as you suspected, the banks aren’t making any loans, that is, they are sitting on all $100 billion in excess reserves. Given these new conditions from SCENERIO B, answer #4-6.

What is the MB? A) 600 B) 700 C) 1060 D) 2400 E) 3200

5. What is the money multiplier? Round to 3 decimal places. A) 3.429 B) 4.333 C) 4.012 D) 5.413

6. What is the money supply? Use mm x MB to calculate this and Round to the nearest whole number. A) 600 B) 700 C) 1060 D) 2400 E) 3200

Explanation / Answer

a) 600

5. 4.102

6. D) 2400

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