Suppose That the Fed Undertakes an Open Market Purchase of $25

question 3

Multiple Choice

Suppose that the Fed undertakes an open market purchase of $25 million worth of securities from a bank.If the required reserve ratio is 9%,what is the resulting change in checkable deposits (or the money supply) ,assuming that there are no cash leakages and that banks hold zero excess reserves?

• A) $277.8 million
• B) $225 million
• C) $28 million
• D) $34 million

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