(Solved): Consider a banking system where the Federal Reserve uses required reserves to control the money supp ...

Considerating system where the Federal Reserve unes required reserves to control the money supply. (This was the came in the US, prior to 2008.) Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis suppose the banking system has total reserves of $100. Determine the money multiplier and the money supply for each reserve quement listed in the following table Reserve Requirement Money Supply (Dollars) Simple Honey Multiplier 15 10 A lower reserve requirement is acted with money supply Suppose the Federat Reserve wants to increase the money supply by $100. Apes, you can assume that banks do not hold excess serves and that households du hold currency If the reserve requirement is 10%, the Fed will use pen-market operations to worth of U.S. government bonds Now, supose that, rather than immediately lending out all exas reserves, banks begin holding some excese reserves due to uncertain ecopre conditions. Specifically, banka mosse the percentage of deposits held as reserves from 10% to 20% This increase in the reserverato cause the money multiplier to Under the candicons, the Fed would need to worth of US, government sonde der crease the money supply by $100. Which of the following statements help to a why, the real world, the Fed cannot precisely control the money supply? Check all that any The fed cant contnt whether and to what extent banks hold excess reserves The fit cannot send the amount of money that households choose to hold as currency