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The banking system currently has $200 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement
The banking system currently has $200 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 20 percent. If the Fed lowers the reserve requirement to 10 percent and at the same time buys $20 billion worth of bonds, then by how much does the money supply change?
It rises by $110 billion.
It rises by $1,200 billion.
It decreases by $100 billion.
It rises by $2,400 billion.
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