1. How do banks create new deposits by making loans, and what factors limit the amount of...
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1. How do banks create new deposits by making loans, and what factors limit the amount of deposits and loans that they can create?
2. If the Fed makes an open market sale of $1 million of securities, who can buy the securities? What initial changes occur if the Fed sells to a bank?
3. If the Fed makes an open market sale of $1 million of securities, what is the process by which the quantity of money changes? What factors determine the change in the quantity of money?
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1 Banks can make loans when they have excess reserves When a bank makes a loan it creates a new depo...View the full answer
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