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Assume that the Bank of Ecoville has the following balance sheet and the Fed has a 10% reserve requirement in place: Balance Sheet for Ecoville

Assume that the Bank of Ecoville has the following balance sheet and the Fed has a 10% reserve requirement in place:

Balance Sheet for Ecoville International Bank

ASSETS

LIABILITIES

Cash

$33,000

Demand Deposits

$99,000

Loans

66,000

Now assume that the Fed lowers the reserve requirement to 8%.

By how much has the money supply increased or decreased?

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