Week 8: Homework @ Saved Help 5 points eBook Print References Problem 14-03 (algo) Suppose the Federal Reserve decided to buy $10 billion worth of government securities in the open market. Instructions: Enter your responses as a whole number. a. By how much will M1 change initially if the entire $10 billion is deposited into transactions accounts? M1 will initially [ (Click to select) ] by $ billion. b. How will the lending capacity of the banking system be affected if the reserve requirement is 10 percent? Total lending capacity will | (Click to select) ] by $ billion. c. How will banks induce investors to respond to this change in lending capacity? If the money supply increases, interest rates will | (Click to select) | and investors will want to borrow | (Click to select) + | funds. If the money supply decreases, interest rates will | (Click to select) | and investors will want to borrow | (Click to select) + | funds. Save Exit Subn