Suppose Banks Desire to Keep 5 Percent of All Deposits

Multiple Choice

Suppose banks desire to keep 5 percent of all deposits on reserve, and the Fed purchases $10 million of government securities from a private securities dealer. Then,

A) there cannot be any change in bank deposits.
B) the maximum amount that deposits in the economy can decrease will be $10 million.
C) the maximum amount that deposits can decrease will be $200 million.
D) the maximum amount that deposits in the economy can increase will be $10 million.
E) the maximum amount that deposits can increase will be $200 million.