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Suppose the Federal Reserve decided to buy $25 billion worth of...

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Accounting

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Suppose the Federal Reserve decided to buy $25 billion worth of government securities in the open market: i. By how much wil MI chango inilially if the entire $25 bilion is deposited into transactions accounts? Note: If Mt docreases be sure to inchade a negatwo sign (f) in front of your answor. Mi will initiatly change by: bilion b. How will the lending capacity of the banking system be affected if the reserve requirement is 10 percent? Nofe: if landing capacity docroases be sure to include a negative sign () in front of your answor. Total lunding enpocity witt change by: billion c. How wal banks induce investors to respond to this change in lending capacity? If the money supply increases, imterest rates and investore wil want to borrow more will funds. If the money supply decroases, interest rates and investors will want to borrow fewer will funds

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