The banking system currently has $10 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the central bank lowers the reserve requirement to 8.75 pèrcent and at the same time sells $1 billion worth of bonds, then by how much does the money supply change? (*

Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Monetary System
Section: Chapter Questions
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The banking system currently has $10 billion of reserves, none of which are excess. People hold only
deposits and no currency, and the reserve requirement is 10 percent. If the central bank lowers the
reserve requirement to 8.75 percent and at the same time sells $1 billion worth of bonds, then by
how much does the money supply change? (*
Transcribed Image Text:The banking system currently has $10 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the central bank lowers the reserve requirement to 8.75 percent and at the same time sells $1 billion worth of bonds, then by how much does the money supply change? (*
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