5. Assume that the reserve requirement is 5 percent. All otherthings being equal:
Will the money supply expand more if the Fed buys $2,000 worthof bonds or if someone deposits in a bank $2,000 that he had beenhiding in his cookie jar?
If one creates more, how much more does it create?
6. Assume that the banking system has total reserves of $100billion. Assume also that required reserves are 10 percent ofchecking deposits and that banks hold no excess reserves andhouseholds hold no currency.
What is the money multiplier? _______What is the money supply?$__________
