(Solved): Consider a banking system where the Federal Reserve uses required reserves to control the money su ...

Consider a banking system where the Federal Reserve uses required reserves to control the money supply. (This was the case in the U.S. prior to 2008.) Assume that banks do not hold excess reserves and that households do not hold currency, so the only form is demand the requirement listed in the following table. A higher reserve requirement is associated with a money supply. Suppose the Federal Reserve wants to increase the money supply by \( \$ 200 \). Again, you can assume that banks do not hold excess reservent that households do not hold currency. If the reserve requirement is \( 10 \% \), the Fed will use open-market operations to U.S. government bonds. conditions. Specifically, banks increase the percentage of deposits held as reserves from \( 10 \% \) to \( 25 \% \). This increase in the reserve to increase the money supply by \( \$ 200 . \) Which of the following statements help to explain why, in the real world, the Fed cannot precisely control the money supply? Check all that The Fed cannot prevent banks from lending out required reserves. The Fed cannot control the amount of money that households choose to hold as currency.