Answer
a) The money multiplier is 10, and the money supply is 1 trillion dollars.
b) The money supply decreases 500 million dollars, and there is no change to the reserves.
Work Step by Step
a)
Money multiplier = 1/reserve ratio
$M = 1/.1$
$M = 10$
Money supply = Multiplier * Reserves
$S = 10*100$
$S = 1000$
b)
Money multiplier = 1/reserve ratio
$M = 1/.2$
$M = 5$
Money supply = Multiplier * Reserves
$S = 5*100$
$S = 500$
