Using a required reserve ratio of 5% and if banks keep no excess reserves, what is the value of government securities the Fed must purchase if it wants to increase the money supply by $2 million?

Week 6 Homework

•  In one sentence, what is the difference between fiat and commodity money?
• Suppose you withdrew $100 cash from your checking account.  What impact (increase, decrease, or no change) would this action alone have on the following:
  • The money supply
  • Your bank’s level of required reserves
  • Your bank’s level of excess reserves
• Using a required reserve ratio of 5% and if banks keep no excess reserves, what is the value of government securities the Fed must purchase if it wants to increase the money supply by $2 million?