Suppose the Fed Bought $150 Million of U

question 109

Multiple Choice

Suppose the Fed bought $150 million of U.S. securities from security dealers. The reserve requirement is 20 percent, and there are no initial excess reserves. A few weeks later, if the public's holdings of currency are constant and the banks have loaned all excess reserves, the money supply will increase by:

• A) $150 million.
• B) $300 million.
• C) $600 million.
• D) $750 million.

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