Suppose that, using past data, the staff of the Board of Governors of the Federal Reserve estimates the currency-to-deposit ratio to be equal to 0.70 and the excess reserve-to-deposit ratio to be equal to 1.20. Suppose further that the average required reserve ratio is 0.10.

(a) Based on the data provided, calculate the value of the multiplier. Round your answer to the nearest .01 e.g., 1.1693=1.17.)

With some heightened concerns about future inflationary pressures, the FOMC considers implementing a more restrictive monetary policy in 2021. Calculate the effects of an open market sale of 100 billion dollars worth of US government bonds on the money supply, checkable deposits and reserves. (Express each of your answers in billions of dollars and round to the nearest billion. Also be sure to indicate an increase with a plus (+) sign and a decrease with a minus (-) sign. For example, if your calculations show an increase of $1,169,300,000 = $1.1693 billion, you should write +1 in the blank space; and, if your calculations show a decrease of $1,169,300,000= $1.1693 billion, you should write -1 in the blank space.)

(b) money supply: billion dollars.

(c) checkable deposits: billion dollars.

(d) reserves: billion dollars.

(e) Would you increase, decrease or leave unchanged your prediction for the change (in absolute terms or equivalently in magnitude) in the money supply (part b), if taxes were increased early next year? in absolute terms.