In a Fractional-Reserve Banking System with No Excess Reserves and No

question 124

Multiple Choice

In a fractional-reserve banking system with no excess reserves and no currency holdings,if the central bank buys $100 million worth of bonds,

• A)reserves and the money supply increase by less than $100 million.
• B)reserves increase by $100 million and the money supply increases by $100 million.
• C)reserves increase by $100 million and the money supply increases by more than $100 million.
• D)both reserves and the money supply increase by more than $100 million.

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