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Open market purchase of government bonds

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Reference no: EM132476860

The Federal Reserve conducts a $10 million open market purchase of government bonds. The required reserve ratio is 10%.

a. What is the largest possible increase in the money supply that could result? Explain any assumptions that you make.

b. What is the smallest possible increase in the money supply that could result? Explain any assumptions that you make.

Reference no: EM132476860

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