suppose the federal reserve decide to sell $25 billion

Suppose the Federal Reserve decided to sell $25 billion worth of government securities in the open market. a. By how much will MI change initially if the entire $25 billion is withdrawn from transactions accounts? Mote: If MI decreases be sure to include a negative sign (-) in front of your answer. MI will initially change by: billion b. How will the lending capacity of the banking system be affected if the reserve requirement is 5 percent? Mote: If lending capacity decreases be sure to include a negative sign (-) in front of your answer. Total lending capacity will change by: c. How will banks induce investors to respond to this change in lending capacity? billion If the money supply increases, interest rates will If the money supply decreases, interest rates will and investors will want to borrow more funds. and investors will want to borrow fewer funds.