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Suppose the banking system in an economy looks like this after an open market operation: ASSETSLIABILITIES Reserves$2B|DD $10B Loans$4B| Bonds$4B| and the reserve requirement is

Suppose the banking system in an economy looks like this after an open market operation:

ASSETSLIABILITIES

Reserves$2B|DD $10B

Loans$4B|

Bonds$4B|

and the reserve requirement is 10%. If banks never hold any excess reserves, and people never hold any cash in their pocket, how much would the money supply increase?

Suppose banks always keep excess reserves of 2% of their demand deposits. How much would the money supply increase in that case?

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