Induce investors to utilize this expanded lending capacity

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Reference no: EM131002595

Suppose the Federal Reserve decided to purchase $10 billion worth of government securities in the open market.

a. How will M1 be affected initially?

b. How will the lending capacity of the banking system be affected if the reserve requirement is 20 percent?

c. How will banks induce investors to utilize this expanded lending capacity?

Reference no: EM131002595

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