If a Bank Uses $80 of Excess Reserves to Make

question 162

Multiple Choice

If a bank uses $80 of excess reserves to make a new loan when the reserve ratio is 25 percent,what happens to the money supply in the very short term?

• A)It decreases by $80.
• B)It increases by $20.
• C)It decreases by $20.
• D)It increases by $80.

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