Part 2 - Check Your Understanding - Suppose the Fed buys $1,000 in bonds from Bank of LaMoney , the reserve requirement is 10%, and the bank holds 10% excess reserves 15. How does the bank's choice to hold 10% of deposits as excess reserves affect the size of the money multiplier ? Explain your answer 16. Assume that all banks hold 10% excess reserves . Calculate the total increase in the money supply 17 . Suppose all banks decide to lend all excess reserves . Calculate the total increase in the money supply from the original $1,000 open -market bond purchase 18. If the reserve requirement is 10% and a bank has $8,000 in deposits and $1,000 in reserves , how much in excess reserves does the bank have ? 19 . A bank has $200,000 in deposits and no excess reserves . The reserve ratio is 0.1 and a customer withdraws $10,000 . To meet the reserve requirement , by how much must the bank increase its reserves ? 20. A bank has $400,000 in deposits and no excess reserves . The reserve ratio is 0.2 and a customer withdraws $10,000 . To meet the reserve requirement , by how much must the bank increase its reserves ? 21 . Draw a correctly labeled money market graph and a correctly labeled AS /AD graph showing a negative output gap . Show the result of the Fed's open -market purchase on both graphs 22 . Which of the four components of GDP are most directly impacted by monetary policy ? Explain your reasoning 23 . Explain how the open -market purchase affects the price level and real output on the AS /AD model