1. The following is the "T-Account" for the entire banking system. Assume that banks are fully loaned up: this means that banks are holding only the required amount of reserves and thus are making the maximum possible amount of loans.

Question:

f. Suppose the Fed wants to increase the Money Supply by 500b. Calculate the necessary amount of purchase or sale of bonds.

Transcribed Image Text:

Reserves = r=10% Loans = D= 700b Reserves = r=10% Loans = D= 700b