Credit Sprint / Practice problems / Open market operations

Open market operations practice problems

Macroeconomics Unit 4. Try each one, then open the worked solution. The Credit Sprint app generates unlimited new versions with fresh numbers.

Problem 1.

The Fed sells $90 million of bonds to banks. The reserve requirement is 25%. What is the maximum change in the money supply? (Use a negative number for a decrease.)

Show solution

Reserves change by −$90M, all excess. × 4 = −$360M.

Problem 2.

The Fed buys $80 million of bonds from banks. The reserve requirement is 10%. What is the maximum change in the money supply? (Use a negative number for a decrease.)

Show solution

Reserves change by +$80M, all excess. × 10 = +$800M.

Problem 3.

The Fed buys $30 million of bonds from banks. The reserve requirement is 10%. What is the maximum change in the money supply? (Use a negative number for a decrease.)

Show solution

Reserves change by +$30M, all excess. × 10 = +$300M.

Problem 4.

The Fed sells $50 million of bonds to banks. The reserve requirement is 20%. What is the maximum change in the money supply? (Use a negative number for a decrease.)

Show solution

Reserves change by −$50M, all excess. × 5 = −$250M.

Problem 5.

The Fed buys $10 million of bonds from banks. The reserve requirement is 20%. What is the maximum change in the money supply? (Use a negative number for a decrease.)

Show solution

Reserves change by +$10M, all excess. × 5 = +$50M.

Problem 6.

The Fed sells $40 million of bonds to banks. The reserve requirement is 20%. What is the maximum change in the money supply? (Use a negative number for a decrease.)

Show solution

Reserves change by −$40M, all excess. × 5 = −$200M.