In an open-market operation, the Fed buys $20 million of government bonds from individual investors.If the required reserve ratio is 7 percent, the largest possible increase in the money supply that could result is $_________million.Put your answer to the second decimal place.  For example, if the answer is 12.3456, put 12.35.

In an open-market operation, when the Federal Reserve (Fed) buys government bonds, it essentially injects money into the economy. This increases the reserves of the banks, which they can then lend out, creating more money in the economy.

The maximum change in the money supply is determined by the money multiplier, which is the reciprocal of the reserve requirement.

The formula for the money multiplier is 1 / Reserve Requirement.

In this case, the reserve requirement is 7 percent, or 0.07.

So, the money multiplier is 1 / 0.07 = 14.29 (rounded to two decimal places).

The maximum change in the money supply is then the amount of bonds bought by the Fed multiplied by the money multiplier.

So, the maximum change in the money supply is $20 million * 14.29 =$285.80 million.

So, the largest possible increase in the money supply that could result from the Fed buying $20 million of government bonds from individual investors with a required reserve ratio of 7 percent is$285.80 million.

The largest possible increase in the money supply is calculated using the money multiplier formula, which is 1 divided by the required reserve ratio.

Step 1: Convert the required reserve ratio to a decimal. 7 percent is 0.07.

Step 2: Calculate the money multiplier. The formula is 1 / required reserve ratio. So, 1 / 0.07 = 14.29.

Step 3: Multiply the amount of bonds the Fed bought by the money multiplier. So, $20 million * 14.29 =$285.8 million.

Therefore, the largest possible increase in the money supply that could result from the Fed buying $20 million of government bonds from individual investors is$285.8 million.