Question: The Deposit Expansion Process: The Simple Analytics Suppose there are $1,000 million worth of checkable deposits in the banking system. The reserve requirement is 10

The Deposit Expansion Process: The Simple Analytics

Suppose there are $1,000 million worth of checkable deposits in the banking system. The reserve requirement is 10 percent.

  1. What will ultimately happen to the money supply if the Fed cuts the reserve requirement to 8 percent?
  2. What will ultimately happen to the money supply if the Fed increases the reserve requirement to 15 percent?

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