Suppose the Federal Reserve decided to sell $25 billion worth of government securities in the open market. Instructions: Enter your responses as a whole number. By how much will M1 change initially if the entire $25 billion is withdrawn from transactions accounts? M1 will initially decrease by $ 25 billion. How will the lending capacity of the banking system be affected if the reserve requirement is 10 percent? Total lending capacity will decrease by $ ? billion.



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