Suppose the Federal Reserve Increases Deposits at Financial Institutions by $50

question 16

Multiple Choice

Suppose the Federal Reserve increases deposits at financial institutions by $50 billion through its open market operations.If the reserve requirement for all deposits is 8%,what is the maximum impact the Fed's actions can have on total deposits?

• A) $575 billion increase
• B) $54.3 billion increase
• C) $625 billion increase
• D) An increase greater than $1 trillion
• E) Total deposits would decrease,but there is not enough information to compute the amount.

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