macroeconomics q3-4

QUESIIOM a If commercial banks face a 5% reserve requirement and the Fed buys $.40 billion of bonds, M1 will (increase or decrease) _ _ by _ _ billion dollars assuming commercial banks are 'Ioaned up' and there are no monetary leakages in the economy. Record your answer without a dollar sign; an answer such as 45 will be recorded as 45 billion dollars. Qussnou 4 Suppose, currently, the annual interest rate on a typical loan available through commercial banks is at 4.5%. Suppose too that banks face a 5% reserve requirement, 2/5 of which can be met by borrowing from the Federal Reserve at a discount rate of rate of 1%. A $303 open market purchase by the Federal Reserve can increase the nation's money supply by as much as billion dollars. Record your answer without a dollar sign; an answer such as 4.5 will be recorded as 4.5 billion dollars