Suppose the level of the required reserve ratio on checkable deposits was 0.10. Also assume that the public’s holdings of currency were constant, as were banks’ desired excess reserves. Analyze the...

Suppose the level of the required reserve ratio on checkable deposits was 0.10. Also assume that the public’s holdings of currency were constant, as were banks’ desired excess reserves. Analyze the effects on the money supply of a $1,000 open-market sale of securities by the Federal Reserve. In your answer, explain the role of the banking system in adjusting to this monetary policy action.