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Government securities from a commercial bank

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Reference no: EM131296574

Using a required reserve ratio of 10% and assuming that the banks keep no excess reserves, which of the following scenarios produces a larger effect on the money supply?

a. Someone takes $1,000 from under his or her mattress and deposits it into a checking account.

b. The Fed purchases $1,000 in government securities from a commercial bank.

Reference no: EM131296574

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