Homework Answers
a) Money multiplier = 1 / Reserve Ratio = 1 / 0.20 = 5
b) the change in the total money supply = multiplier*initial change in the reserves
money supply change = 5 * (-60) = -$300 million
c) the required change in reserves = required change in money supply/multiplier
decrease reserves = 500 / 5 = $100 million or change = -$100 million
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