Suppose that the reserve requirement in an economy is 0.35 and the Federal Reserve deposits $550 into commercial banks. What is the maximum possible change in the money supply? (Treat the entire amount of the deposit as the initial excess reserves.) Round your answer to two decimal places. Provide your answer below: Change in $M_s = \boxed{} \times \frac{1}{\boxed{}} = \boxed{}$
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The initial excess reserves are equal to the entire amount of the deposit, which is $550. Show more…
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