Exhibit 15-4 Balance sheet of Tucker National Bank
Assets
Liabilities
Required reserves$ 4,000
Checkable deposits$20,000
Excess reserves16,000
Loans 0
Total$20,000
Total$20,000
Assume all banks in the system started with the balance sheet shown in Exhibit 15-4 and the Fed makes a $1,000 open market purchase. The result would be a(n):
A. infinite contraction of the money supply.
B. infinite expansion of the money supply.
C. $1,000 expansion of the money supply.
D. $5,000 expansion of the money supply.
Answer: D
Economics
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