Assume that the banking system has total reserves of Rs.250 billion. Assume also that required reserves are 10 percent of checking deposits and that banks hold no excess reserves and households hold no currency.

A. Calculate the money multiplier?

B. Calculate the money supply?

If the State Bank of Pakistan now raises required reserves to 12.5 percent of deposits,

C. Calculate the money multiplier?

D. What will be the effect on Reserves?

E. The amount of money supply will decline to