1. Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required reserve ratio is 15.00%, and the Federal Reserve wants to increase the money supply by $70.00 million, the Fed would need to make an open market purchase of $million. 2. Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required reserve ratio is 20.00%, and the Federal Reserve wants to decrease the money supply by $50.00 million, the Fed would need to make an open market sale of $million.
3. Suppose that banks decide to hold excess reserves. In order for the Federal Reserve to change the money supply by the same amounts as in parts 1 and 2, it would need to make:.
a. a smaller open market purchase and a smaller open market sale.
b. a larger open market purchase but a smaller open market sale.
c. a smaller open market purchase but a larger open market sale.
d. a larger open market purchase and a larger open market sale.