Suppose that, for every $1-$percentage$-$point decline in the discount rate, commercial banks collectively borrow an additional $$2$ billion from Federal Reserve Banks. Also assume that the reserve ratio is $10$ percent. If the Fed lowers the discount rate from $4\mathrm{.}0$ percent to $3\mathrm{.}5$ percent, bank reserves will

increase by $$10$ billion and the money supply will increase by $$100$ billion.

decline by $$1$ billion and the money supply will decline by $$10$ billion.

increase by $$1$ billion and the money supply will increase by $$10$ billion.

increase by $$1$ billion and the money supply will increase by $$5$ billion.