Question about money multiplier

Reference no: EM1374423

Suppose that the banking system is in reserve equilibrium. The Fed conducts an open market buy of Treasury securities in the value of $1 billion. The reserve requirement against deposits is 10 percent. Identify the potential amount of the money supply increase as a consequence of the Fed's action and describe fully how money is created by the banking system subsequent to the Fed's open market purchase of Treasury securities in the amount of $1 billion.

Reference no: EM1374423

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