If the Fed Sells a Member Bank a $3,000 Security,the

question 167

Multiple Choice

If the Fed sells a member bank a $3,000 security,the required reserve ratio is 20 percent,banks hold no excess reserves,and all loans are redeposited,then the money supply (Hint: Compare what the banking system might have done if it had loaned at every opportunity; also include the initial transaction with the Fed.)

• A)increases by less than $15,000
• B)decreases by less than $15,000
• C)increases by $15,000
• D)decreases by more than $15,000
• E)decreases by $15,000

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