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# total increase or decrease in the money supply

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Suppose the Fed decides to buy \$1 billion in Treasury bonds from the public. Assume that the reserve requirement is 10%.

a.What happens to the interest rate and the money supply?

b.What is the total increase or decrease in the money supply which could result from the Fed's action? Explain your answer.

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#### Solution Preview

Money Supply (Finance)

Suppose the Fed decides to buy \$1 billion in Treasury bonds from the public. Assume that the reserve requirement is 10%.

a.What happens to the interest rate and the money supply?

Fed buying \$1 billion in ...

#### Solution Summary

Total increase or decrease in the money supply is inspected in the solution.

\$2.19