Using A Required Reserve Ratio Of 10 And Assuming That Banks Keep No Excess Rese
Using a required reserve ratio of 10% and assuming that banks keep no excess reserves, which of the following scenarios produces a larger increase in the money supply, explain why.
a) Someone takes $1000 from under his or her mattress and deposits it into a checking account.
b) The Fed purchases $1,000 in government securities from a commercial bank.
