In 2010 M1 was $2 trillion Currency was $850 Million Travelers checks were $20 Billion Demand deposits were $1030 billion The fed decides to reduce the money supply by increasing the reserve requirement ratio from 0.11 to 0.12 Banks are loaned up and the amount of currency in the economy does not change. How much does the change in the reserve requirement change the money supply? Explain

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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In 2010


M1 was $2 trillion
Currency was $850 Million
Travelers checks were $20 Billion
Demand deposits were $1030 billion
The fed decides to reduce the money supply by increasing the reserve requirement ratio from
0.11 to 0.12
Banks are loaned up and the amount of currency in the economy does not change.
How much does the change in the reserve requirement change the money supply? Explain.  

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