Total reserves in the banking system

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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: EM131355087

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