Prosperville is experiencing demand-pull inflation. The government is hoping to reduce the money supply by $400 billion. With a reserve requirement of 0.10, what is the change in reserves needed to achieve the desired change in the money supply?

Prosperville is experiencing demand-pull inflation. The government is hoping to reduce the money supply by $400 billion. With a reserve requirement of 0.10, what is the change in reserves needed to achieve the desired change in the money supply?

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter13: The Federal Reserve System

Section: Chapter Questions

Problem 1WNG

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Question

$40 billion
-$40 billion
-$4,000 billion
$4,000 billion
27

Prosperville is experiencing demand-pull inflation. The government is hoping to reduce the money supply by $400 billion. With a reserve
requirement of 0.10, what is the change in reserves needed to achieve the desired change in the money supply?

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