What is the maximum amount of money that can be created in the banking system by this purchase?

by Creativity+ Timothy K Hamilton

Question by messiah: What is the maximum amount of money that can be created in the banking system by this purchase?
If all banks are meeting their reserve requirement of 20 percent and the Fed buys $ 35,000,000 of securities from these banks, what is the maximum amount of money that can be created in the banking system by this purchase?
Maximum increase in money =

Best answer:

Answer by lennie
The maximum amount of money that can be created is (1/0.2) x $ 35,000,000 = $ 175,000,000.

Just use the required reserve ratio.

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