Suppose the Fed Purchases $100 Million of U

question 58

Multiple Choice

Suppose the Fed purchases $100 million of U.S. securities from security dealers. If the reserve requirement is 20 percent, the currency holdings of the public are unchanged, and banks have zero excess reserves both before and after the transaction, the total impact on the money supply will be a:

• A) $100 million decrease in the money supply.
• B) $100 million increase in the money supply.
• C) $200 million increase in the money supply.
• D) $500 million increase in the money supply.

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The arrangement of events, actions, or processes in the order of their occurrence in time.

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