If the reserve ratio is 10%, and banks do not hold excess reserves, when the Fed purchases $10 million of government bonds, bank reserves
A) increase by $10 million and the money supply could eventually increase by $10 million.
B) decrease by $10 million and the money supply could eventually decrease by $100 million.
C) increase by $10 million and the money supply could eventually increase by $100 million.
D) decrease by $10 million and the money supply could eventually decrease by $10 million
Ans: C) increase by $10 million and the money supply could eventually increase by $100 million.
You might also like to view...
Adverse selection is created by
A) incentives to change behavior after two parties have reached an agreement. B) risk. C) lump-sum taxes. D) private information.
Currently about what percentage of the civilian labor force is unionized in the United States?
A) 6 percent B) 12 percent C) 30 percent D) 70 percent