If the Fed Buys $10 Million of Government Securities When

question 275

Multiple Choice

If the Fed buys $10 million of government securities when the desired reserve ratio is 20 percent and the currency drain ratio is 5 percent,the quantity of money

• A)increases by $42 million.
• B)increases by $50 million.
• C)decreases by $42 million.
• D)decreases by $50 million.
• E)increases by $7.5 million.

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