Suppose the Required Reserve Ratio Is 0

question 53

Multiple Choice

Suppose the required reserve ratio is 0.2 and the Fed buys $100,000 in government securities from Big Bank.The commercial banking system creates _____ as a result of this initial injection by the Fed.

• A)$1,000,000
• B)$500,000
• C)$100,000
• D)$80,000
• E)$200,000