8. The reserve requiremeht, open market operations, and the moneysupply Consider a banking system where the Federal Reserve uses required reserves to control the money supply. (This was the cose in the U.S. prior to 2008.) Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis, suppose the banking system has total reserves of 4100 . Determine the money multiplier and the money supply for each reserve requirement listed in the following table. A lower reserve requirement is associated with a money supply. Suppose the Federat Reserve wants to increase the money supply by $100. Again, you can assume that banks do not hold excess reserves and thot househalds do not hold currency. If the reserve requirement is 10%, the Fed will use open-market operations to worth of U.S. government bonds. Now, suppose that, rather than immediately lending out all excess reserves, banks begin holding some excoss reserves due to uncertain economic: conditions. Specifically, banks increase the percentage of deposits held as reserves from 10% to 20%. This increase in the reserve ratio causes the money multiplier to to . Under these conditions, the Fed would need to wort to increase the money supply by $100