Refer to the given data. Suppose the Fed sold $10 billion of U.S. securities to the banks. This would:

Answer the question on the basis of the following consolidated balance sheet of the

commercial banking system. Assume that the reserve requirement is 10 percent. All figures

are in billions and each question should be answered independently of changes specified in

any preceding ones.



A.  increase bank reserves to $70 billion, reduce bank-held securities to $130 billion, and

ultimately increase the money supply (checkable deposits) by $100 billion.

B.  increase bank reserves to $70 billion, reduce bank-held securities to $130 billion, and

ultimately decrease the money supply (checkable deposits) by $100 billion.

C.  reduce bank reserves to $50 billion, increase bank-held securities to $150 billion, and

ultimately increase the money supply (checkable deposits) by $100 billion.

D.  reduce bank reserves to $50 billion, increase bank-held securities to $150 billion, and ultimately decrease the money supply (checkable deposits) by $100 billion.

D.  reduce bank reserves to $50 billion, increase bank-held securities to $150 billion, and ultimately decrease the money supply (checkable deposits) by $100 billion.