In Macroland, Currency Held by the Public Is 2,000 Econs

Multiple Choice

In Macroland, currency held by the public is 2,000 econs, bank reserves are 300 econs, and the required reserve/deposit ratio is 10 percent. If the Central Bank raises the required reserve/deposit ratio making the new desired ratio equal to 15 percent, then the money supply in Macroland will ________ to ________ econs, assuming that the public does not wish to change the amount of currency it holds.

A) increase; 4,000
B) increase; 5,000
C) decrease; 4,000
D) decrease; 5,000