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Bank A lends $8 million to bank B so that bank B can maintain its required reserve: Suppose required reserve ratio at 5%. a. What
Bank A lends $8 million to bank B so that bank B can maintain its required reserve: Suppose required reserve ratio at 5%. a. What happens to the reserve in banking system? Increase/decrease/remains the same. (2 points) b. Does money supply change? If so, by how much? (2 points) Bank B borrows $3 million from the Fed. Required reserve ratio is still set at 5%. c. What happens to the reserve in bank B? (2 points) d. Does money supply change? If so, by how much? (3 points)
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