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Assume that the banking system has total reserves of $200 billion. Assume also that required reserves...

Assume that the banking system has total reserves of $200 billion. Assume also that required reserves are 12.5 percent of checking deposits and that banks hold no excess reserves and households hold no currency.

The money multiplier is ____.

The money supply is ____ billion.

Suppose the Fed raises required reserves to 16 percent of deposits.

The new money multiplier is____, and the money supply Increases/Decreases to _____ billion.

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Reserve 12.5% 9

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