Solution-Billion worth of bonds, Total reserves in the

Billion worth of bonds

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Reference no: EM131357563

Total reserves in the banking system is $120 billion none of which are excess. People hold only deposits and no currency, and the reserve requirement is 8%. If the Fed reduces the reserve requirement to 6% and at the same time sells $35 billion worth of bonds, then by how much does the money supply change?

Decreases by 13%
Decreases by 27%
Increases by 13%
Increases by 27%

Reference no: EM131357563

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Billion worth of bonds

Reference no: EM131357563

Reference no: EM131357563

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