Total reserves in the banking system is $120 billion none of which are excess. People hold only deposits and no currency, and the reserve requirement is 8%. If the Fed reduces the reserve requirement to 6% and at the same time sells $35 billion worth of bonds, then by how much does the money supply change?
- Decreases by 13%
- Decreases by 27%
- Increases by 13%
- Increases by 27%