## Answers

Deposit multiplier = 1/required reserve ratio = 1/10%

Deposit multiplier = 10

If 60 million treasury bills are purchased,

Maximum Change in money supply = 60*10 = $600 million (money supply will increase)

Money supply will not change up to that level, because some of the cash withdrawn, will not be deposited back in the bank. Some of the money will be kept at home for some emergency purposes. So, multiplier effect will not work and total maximization in money supply will not increase.

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