Assume that the banking system has total reserves of $882 billion.

Assume also that required reserves are 42 percent and that banks do not hold any excess reserves and households hold no currency.

5. What is the money multiplier?2.38

6. What is the level of deposits?2,100

7. Now suppose that the Fed decreased the required reserves to 33.6.What is the new multiplier?

8. If the Fed decreases the required reserves to 33.6, what is the level of excess reserves? Make sure to include a negative sign if necessary.