The U.S. money supply (M1) at the beginning of 2015 was $2,683.3 billion broken down as follows:

Question:

The U.S. money supply (M1) at the beginning of 2015 was $2,683.3 billion broken down as follows: $1165.7 billion in currency, $3.5 billion in traveler’s checks, and $1,514.1 billion in checking deposits. Suppose the Fed decided to decrease the money supply by increasing the reserve requirement from 10 percent to 12 percent. Assuming all banks were initially loaned up (had no excess reserves) and currency held outside of banks did not change, how large a change in the money supply would have resulted from the change in the reserve requirement?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Principles of Macroeconomics

ISBN: 978-0134078809

12th edition

Authors: Karl E. Case, Ray C. Fair, Sharon E. Oster

Question Posted: