Suppose the Required Reserve Ratio Is 10 Percent, and Banks

question 73

Multiple Choice

Suppose the required reserve ratio is 10 percent, and banks hold no excess reserves. If the Fed purchases $10 million worth of government bonds from Bank INF, the amount of deposits held by the entire banking system will ultimately

• A)increase by $100 million.
• B)decrease by $10 million.
• C)decrease by $100 million.
• D)not change.
• E)increase by $10 million.

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