Indicate whether the following statement is true or false. Provide at least thre

Question

Indicate whether the following statement is true or false. Provide at least three sentences of Explanation or calculation to support your answer. 4. Assume that the reserve requirement ratio is 12 percent and that the Fed uses open market operations by buying $300 million worth of Treasury securities. Assuming that banks use all funds except required reserves to make loans and that the public does not store any cash, the money supply should decrease by about 300 million. A) True B) False Explanation:

Explanation / Answer

FALSE

RRR (reserve requirement ratio ) is 12 percent AND thus, the money supply should not decrease by about 300 million.

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