Problem
The Federal Open Market Committee (FOMC) is tightening monetary policy and has decided to decrease M1 (currency + demand deposits) by selling $115 billion worth of Treasuries in an open market operation (OMO). Commercial banks are subject to a reserve requirement of 12 percent and borrowers return 92 percent of loan funds to their banks in the form of transaction deposits. Calculate the amount of Treasuries (in billion $) the trading desk at the Federal Reserve Bank of New York needs to sell in order to reduce M1 by $115 billion.