If a Bank Uses $100 of Excess Reserves to Make

question 24

Multiple Choice

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 25 percent,what happens to the money supply in the very short term?

• A) It decreases by $100.
• B) It increases by $25.
• C) It decreases by $25.
• D) It increases by $100.

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