Assume the reserve requirement is 10 percent,demand deposits are $200 million,and total reserves are $18 million.If the reserve requirement is increased to 14 percent,the banking system will have

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Initially, the required reserves are 10% of $200 million, which is $20 million. However, the total reserves held by banks are only $18 million. This means that there is a deficiency of reserves of $2 million, which banks need to make up for.

If the reserve requirement is increased to 14%, the required reserves will increase to $28 million (14% of $200 million). However, the total reserves held by banks remain at $18 million. This means that there is now a deficiency of reserves of $10 million ($28 million - $18 million). Therefore, the banking system will have a deficiency of reserves equal to $10 million.

Assume the Reserve Requirement Is 10 Percent,demand Deposits Are $200