9. Problems and Applications Q9 Suppose that the reserve requirement for checking deposits is 20 percent and that banks do not hold any excess reserves. If the Fed sells $3 million of government bonds, the economy's reserves by $ million, and the money supply will by $ million. Now suppose the Fed lowers the reserve requirement to 15 percent, but banks choose to hold another 5 percent of deposits as excess reserves. True or False: The money multiplier will increase. True False True or False: As a result, the overall change in the money supply will decrease. True False