Assume that any money lent by a bank is always deposited back in the banking system as a checkable deposit and that the required reserve ratio is 15%….

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Assume that any money lent by a bank is always deposited back in the banking system as a checkable deposit and that the required reserve ratio is 15%. Discuss how an open market purchase of $50 million worth of bonds (or treasury bills) by the Fed would affect checkable bank deposits. What is the size of the money multiplier?

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