Suppose in the Republic of Sasquatch that the regulation of banking rested with the Sasquatchian Congress, including

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Suppose in the Republic of Sasquatch that the regulation of banking rested with the Sasquatchian Congress, including the determination of the reserve ratio. The Central Bank of Sasquatch is charged with regulating the money supply by using open market operations. In September 2018, the money supply was estimated to be 84 million yetis. At the same time, bank reserves were 12.6 million yetis and the reserve requirement was 15 percent. The banking industry, being “loaned up,” lobbied the Congress to cut the reserve ratio. The Congress yielded and cut required reserves to 12 percent. What is the potential impact on the money supply? Suppose the central bank decided that the money supply should not be increased. What countermeasures could it take to prevent the Congress from expanding the money supply?

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Principles Of Macroeconomics

ISBN: 9781292303826

13th Global Edition

Authors: Karl E. Case,Ray C. Fair , Sharon E. Oster

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