Suppose the reserve ratio is 25% and banks do not hold excess reserves. When the Fed sells $40 million of bonds to the public,
A) bank reserves increase by $40 million and money supply could increase by a maximum of $40 million.
B) bank reserves increase by $40 million and money supply could increase by a maximum of $160 million.
C) bank reserves decrease by $40 million and money supply could decrease by a maximum of $40 million.
D) bank reserves decrease by $40 million and money supply could decrease by a maximum of $160 million.
Ans: D) bank reserves decrease by $40 million and money supply could decrease by a maximum of $160 million.
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Step one in the scientific method is
a. formulate a hypothesis b. reflect an opinion c. specify assumptions d. identify the question and define relevant variables e. test the hypothesis
If a ton of steel sells for $15,000 and a car made from a ton of steel sells for $30,000 . then if all markets are perfectly competitive, how many cars can be made from the last ton of steel used by a profit-maximizing firm?
a. 1/3 car b. 1/2 car c. 1 car d. 1.5 cars