If the Fed Buys a $100,000 Government Security from a Bank

question 29

Multiple Choice

If the Fed buys a $100,000 government security from a bank when the desired reserve ratio is 10 percent and the currency drain ratio is 50 percent,the bank can loan a maximum of

• A)$50,000.
• B)$40,000.
• C)$100,000.
• D)$90,000.
• E)$60,000.