g The Fed makes an open market operation purchase of $200,000. The currency drain ratio is 33.33 percent and the desired reserve ratio is 10 percent. By how much does the quantity of money increase?

From the question, we are informed that the Fed makes an open market operation purchase of $200,000 and that the currency drain ratio is 33.33 percent and the desired reserve ratio is 10 percent.

We first have to calculate the money multiplier which will be:

= (1 + the currency drain ratio)/( the currency drain ratio + the reserve ratio)

= (1 + 33.33%)/(33.33% + 10%)

= ( 1 + 0.33)/(0.33 + 0.1)

= 1.33/0.43

= 3.09

The quantity of money increase will be:

= 3.09 × $200,000

= $618,000

g The Fed makes an open market operation purchase of​ $200,000. The currency drain ratio is 33.33 percent and the desired reserve ratio is 10 percent. By how much does the quantity of money​ increase?

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g The Fed makes an open market operation purchase of $200,000. The currency drain ratio is 33.33 percent and the desired reserve ratio is 10 percent. By how much does the quantity of money increase?