Author Question: The Federal Reserve System (The Fed) is the ________ incarnation of a central bank in the United ... (Read 156 times)

james9437 · **on:** Jun 30, 2018

The Federal Reserve System (The Fed) is the ________ incarnation of a central bank in the United States.

A) first
B) second
C) third
D) fourth

Question 2

Suppose the required reserve ratio is 8 and that banks hold no excess reserves and the public does not change its currency holdings. If the Fed sells 5 million worth of securities, what happens to the amount of deposits in the banking system?

What will be an ideal response?

succesfull · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

C

Answer to Question 2

The simple deposit multiplier is 1/0.08 = 12.5. The amount of deposits changes by 5 million 12.5 = -62.5 million.