calculating the change in the quantity of money?

Question

if a 50 million dollar purchase is made in the open market from the public. and the currency drain is 35% and the reserve ratio is 7%, whats the change in the quantity of money?

i know the change in money is the (money mulitplier)(change in monetary base)

the change is equal to the open market purchase which is 50 mil right? im having trouble getting the money multiplier.

i think you do 50 million times 0.35 and you get a new reserve. you then multiply the new resevre by 7 % which gives you your new excess reserve. im not sure how many times to do this.

any help is appreciated

Answer 1

you have a purchase-one. normally, there is a stage where MS goes up or down through MR

Answer 2

Suppose 50 mn is the money demanded. Then that divided by the price level is the real balance. Multiply that by (1-0.35) (1-0.07) will give the real money growth. Price level can be substitued by the CPI or consumer price index.
If you are looking at the Multiplyer, then the equaiton is PQ=MV where PQ can be the GNP. If you know the Money supply then you get the velocity. Substitute this in the Money demanded in the growth function. will give the money supply growth. Mutliply by those other facotors and you will get the monitory growth or money demanded. Divide it by CPI to get the real balance.