If All Banks Are Subject to a Uniform 20% Reserve

question 103

Multiple Choice

If all banks are subject to a uniform 20% reserve requirement and demand deposits are the only form of money,a $1,000 open market purchase by the Fed would cause the money supply to

• A)increase by $1,000.
• B)decrease by $1,000.
• C)decrease by $5,000.
• D)increase by $5,000.

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