If the Fed Buys a $100,000 Government Security from a Bank

question 1

Multiple Choice

If the Fed buys a $100,000 government security from a bank when the desired reserve ratio is 10 percent and the currency drain is 50 percent, the bank can loan a maximum of

• A) $50,000.
• B) $40,000.
• C) $100,000.
• D) $90,000.
• E) $60,000.

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