Which of the Following Statements Is True When the Fed

Multiple Choice

Which of the following statements is true when the Fed increases reserves by buying a government bond from a bank?

A) The amount of reserves in the banking system will increase by an amount greater than the amount of the bond purchase.
B) The amount of loans made by the banking system will increase by the amount of the bond purchase.
C) The amount of loans made by that bank will be greater than the increase in reserves.
D) The amount of deposits made by the banking system will increase by the amount of the bond purchase.
E) The amount of reserves in the banking system will increase by the amount of the bond purchase.