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10 April, 23:28

Assume that the following data describe the condition of the banking system: Total reserves $100 billion Transactions deposits $800 billion Cash held by public $400 billion Reserve requirement 0.10 Suppose the Fed wanted to stop further lending activity. To do this, what reserve requirement should the Fed impose?

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  1. 11 April, 00:48
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    12.5%

    Explanation:

    The computation of the reserve requirement is shown below:

    We know that

    Total reserves = New reserve requirement * transaction deposits

    $100 billion = New reserve requirement * $800 billion

    So, the New reserve requirement would be

    = $100 billion : $800 billion

    = 0.125 or 12.5%

    All other information which is given is not relevant. Hence, ignored it
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