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.
c
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The portion of the long-run average cost curve in which economies of scale are experienced shows that as output increases, the
A) average total cost decreases. B) average total cost increases. C) marginal cost increases. D) marginal cost decreases. E) average variable cost is constant and the average fixed cost decreases.
When the Fed buys U.S. government securities from a bank, the Fed
A) loans the money needed to buy the securities to the bank. B) increases the bank's reserves at the Fed. C) obtains the money for the purchase from the U.S. Treasury. D) decreases the monetary base and raises the federal funds rate.