Suppose Fed's Purchase of Government Bonds Results in a $120

question 86

Multiple Choice

Suppose Fed's purchase of government bonds results in a $120, 000 increase in the excess reserves of a particular bank.What would be the applicable reserve requirement for the whole banking system to be able to expand the money supply by $600, 000?

• A)10 percent
• B)12 percent
• C)16 percent
• D)20 percent
• E)25 percent

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