Assume There Is No Leakage from the Banking System and That

question 345

Multiple Choice

Assume there is no leakage from the banking system and that all commercial banks are loaned up. The required reserve ratio is 25%. If the Fed sells $5 million worth of government securities to the public, the change in the money supply will be

• A) $100 million.
• B) $25 million.
• C) -$5 million.
• D) -$20 million.

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