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If the required reserve ratio is 100 percent, could the Federal Reserve still change the money...

If the required reserve ratio is 100 percent, could the Federal Reserve still change the money supply using open market operations? Indicate YES or NO and then support your answer.

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Answer #1

As it has been given that

If the required reserve ratio is 100 percent

=100/100

=1

Money Multplier= 1/ required reserve

=1/1

=1

Money can be created by market operation.

The amount of the money creation= Money multiplier* change in the money supply due to open market operations.

=1* change in the money supply due to open market operations.

=change in the money supply due to open market operations.

It means money creation will be equal to the change in the money supply due to open market operations.

No, no money will be created because because the value of money multiplier is 1.

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