Refer to the given data. Suppose the Fed wants to reduce the money supply by $200 billion to drive up interest rates and dampen inflation. To accomplish this, it could increase 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.  22 percent.
B.  25 percent.
C.  30 percent.
D.  33 percent.

ANSWER:

B.  25 percent.