Suppose the reserve requirement is initially set at 5%.

Instructions: In parts a and c, round your answers to twodecimal places. In parts b and d, round your answers to onedecimal place.

a. At a reserve requirement of 5%, what is the value of the money multiplier?

b. If the reserve requirement is 5% and the Fed increases reserves by $20 billion, what is the total increase in the money supply?

$ billion

c. Suppose the Fed raises the reserve requirement to 10%. What is the value of the money multiplier now?

d. Assume the reserve requirement is 10%. If the Fed increases reserves by $20 billion, what is the total increase in the money supply?

$ billion

e. Raising the reserve requirement from 5% to 10% (Click to select) decreases increases the money multiplier and (Click to select) increases decreases the money supply.