Suppose the Required Reserve Ratio Is 10 Percent, and Banks

Multiple Choice

Suppose the required reserve ratio is 10 percent, and banks hold no excess reserves. If the Fed purchases $10 million worth of government bonds from Bank C, the amount of loans held by Bank C will

A) increase by $10 million.
B) decrease by $100 million.
C) increase by $100 million.
D) decrease by $10 million.
E) not change.