Suppose the Fed Sells $100 Million of U

question 98

Multiple Choice

Suppose the Fed sells $100 million of U.S. securities to the public. If the reserve requirement is 20 percent, the currency holdings of the public are unchanged, and banks have zero excess reserves both before and after the transaction, the total impact on the money supply will be a

• A) $100 million decrease.
• B) $500 million increase.
• C) $500 million decrease.
• D) $100 million increase.

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Definitions:

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