Refer to the given data. Suppose the Fed wants to increase the money supply by $1,000 billion to drive down interest rates and stimulate the economy. To accomplish this, it could lower the reserve requirement from 20 percent to:

Answer the question on the basis of the following consolidated balance sheet of the
commercial banking system. Assume that the reserve requirement is 20 percent. All figures
are in billions and each question should be answered independently of changes specified in all
preceding ones.

A.  10 percent.
B.  12 percent.
C.  14 percent.
D.  15 percent.

ANSWER:

A.  10 percent.