Assume the M2 multiplier is 3, and the reserve ratio is 10%. If the central bank

Question

Assume the M2 multiplier is 3, and the reserve ratio is 10%. If the central bank sells $100million in govt securities to banks, banking system reserves will: A) fall by $10M B) rise by $10M C) not change D) rise by $300M E) fall by $100M Assume the M2 multiplier is 3, and the reserve ratio is 10%. If the central bank sells $100million in govt securities to banks, banking system reserves will: A) fall by $10M B) rise by $10M C) not change D) rise by $300M E) fall by $100M A) fall by $10M B) rise by $10M C) not change D) rise by $300M E) fall by $100M

Explanation / Answer

Solution: fall by $10M

Explanation: As reserve ratio is 10%. and when bank sells $100 million thus banking system reserves will also reduce by 100 * 10% = $10M

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---