Suppose in the republic of sasquatch that the regulation of banking rested with the sasquatchian congress, including the determination of the reserve ratio. the central bank of sasquatch is charged with regulating the money supply by using open market operations. in september 2015, the money supply was estimated to be

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Suppose in the Republic of Sasquatch that the regulation of banking rested with the Sasquatchian Congress, including the determination of the reserve ratio. The Central Bank of Sasquatch is charged with regulating the money supply by using open market operations. In September 2015, the money supply was estimated to be 70 million yetis. At the same time, bank reserves were 8.4 million yetis and the reserve requirement was 12 percent. The banking industry, being "loaned up," lobbied the Congress to cut the reserve ratio. The Congress yielded and cut the reserve requirement to 10 percent.

The potential impact of this action could

a. decrease

b. increase

the money supply by ?

nothing

million yetis.

Answer : increase and million yetis

Explanation:

If the congress yields to the lobby by the banking industry and cut the reserve ratio requirement from 12 percent to 10 percent it significantly will affect the increase in money in supply by ( 1.4 million yetis )

and this increase in money supply will lead to an increase in loanable funds and this will encourage investors t take up loans in which the banking industry will benefit from interest charged on loanable funds given to the investors.

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