If a Bank Uses $100 of Excess Reserves to Make

question 342

Multiple Choice

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 10 percent, this action by itself initially makes the money supply

• A)and wealth increase by $100.
• B)and wealth decrease by $100.
• C)increase by $100 while wealth does not change.
• D)decrease by $100 while wealth decreases by $100.