A2-2. Suppose the consolidated balance sheet (T-account) of the banking system for an economy with a regulated reserve ratio of 10% is given below. If the regulator decreases the reserve ratio to 8%, the money supply will increase by 250. [Hint: Assume that the public holds all its money in the form of bank deposits.] Assets: Liabilities: Reserves 100 Deposits 1000 Government Bonds 300 Loans Outstanding 800 Capital 1200 200 Total Total 1200

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