Attempts as Keep the Highest 05/3 Working through an open market operation Assum

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Attempts as Keep the Highest 05/3 Working through an open market operation Assume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves. (Billions of Dollars) Checkable deposits What is the required reserve ratio? Suppose that the Federal Reserve (the "Fed) sells $1.5 million of bonds to a bond dealer, who pays the Fed by writing a check against the funds in her checking account. What is the initial impact of this transaction? O Checkable deposits fall by $1.5 million, and the banking system's holdings of securities fall by $1.5 million. The banking system's holdings of securities fall by $1.5 million, and the banking system's total reserves rise by $1.5 million. O The banking system's holdings of securities rise by $1.5 mi on, and the banking system's total reserves fall by $1.5 million. O checkable deposits fall by $1.5 million, and the banking system's total reserves fall by $1.5 million. As a result of the Fed's sale of $1.5 million of securities, checkable deposits in the banking system can potentially by as much as

Explanation / Answer

5.

required reserve ratio = 4/20=20%

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