Suppose the Fed Purchases $40,000 of U

question 66

Multiple Choice

Suppose the Fed purchases $40,000 of U.S. Treasury bonds from Benjamin, who deposits the money with First National Bank. If the required reserve ratio is 20 percent, this transaction will increase the excess reserves of First National Bank by

• A) $8,000.
• B) $32,000.
• C) $40,000.
• D) $200,000.

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