Based on the change in money supply and the reserve requirement, the change in reserves required is $40 billion.
The change in money supply is calculated by:
= 1/ reserve requirement x Change in reserves
Solving for change in reserves can be done because the other values are given:
400 billion = 1/ 0.10 x Change in reserves
Change in reserves = 400 billion ÷ 1/0.10
= 400 billion / 10
= $40 billion
In conclusion, the reserves should be reduced by $40 billion.
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