Assume There Is No Leakage from the Banking System and That

question 234

Multiple Choice

Assume there is no leakage from the banking system and that all commercial banks are loaned up. The required reserve ratio is 12.5%. If the Fed buys $20 million worth of government securities from the public, the change in the money supply will be

• A) $20 million.
• B) $125 million.
• C) $160 million.
• D) $250 million.

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