Assume that the banking system has total reserves of Rs.200 billion. Assume also that required reserves are 12.5 percent of checking deposits and that banks hold no excess reserves and households hold no currency.

1. Calculate the money multiplier?
2. Calculate the money supply?

If the State Bank of Pakistan now raises required reserves to 20percent of deposits,

1. Calculate the money multiplier?
2. What will be the effect on Reserves?(Please write only one word "Increase", "Decrease", or "No Change" in the blank)
3. The amount of money supply will decline to(A number in the box)

Note: Amount in Billions only and ignore typing % sign for reserve rate