Answer the question on the basis of the following consolidated balance sheet of the commercial banking system. Assume that the reserve requirement is 20 percent. All figures are in billions and each question should be answered independently of changes specified in all preceding ones.Refer to the given data. Suppose the Fed wants to increase the money supply by $1,000 billion to drive down interest rates and stimulate the economy. To accomplish this, it could lower the reserve requirement from 20 percent to:

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16-12-2022
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Answer the question on the basis of the following consolidated balance sheet of the commercial banking system. Assume that the reserve requirement is 20 percent. All figures are in billions and each question should be answered independently of changes specified in all preceding ones.Refer to the given data. Suppose the Fed wants to increase the money supply by $1,000 billion to drive down interest rates and stimulate the economy. To accomplish this, it could lower the reserve requirement from 20 percent to:

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okpalawalter8 okpalawalter8 · Answer 1 · 2022-12-20T22:53:00+01:00

Assume that the reserve requirement is 20 percent. All figures are in billions and each question should be answered independently of changes specified in all preceding ones. To accomplish this, it could lower the reserve requirement from 20 percent to 18%.

What is the federal reserve's requirement?

Generally, To determine the new reserve requirement, you will need to perform the following calculation:

New reserve requirement = (Current reserve requirement * Total deposits) / (Total deposits + Increase in money supply)

Plugging in the values given in the question, we have:

New reserve requirement = (20% * $10,000 billion) / ($10,000 billion + $1,000 billion)

Simplifying the expression, we get:

New reserve requirement = 18.18%

Therefore, to increase the money supply by $1,000 billion, the Fed could lower the reserve requirement from 20% to 18.