Assume the Reserve Requirement Is 25% and the Federal Open

Multiple Choice

Assume the reserve requirement is 25% and the Federal Open Market Committee buys $4 million of U.S. government bonds from the public. As a result of this transaction, the supply of money is

A) not directly affected but has the potential to be increased by a total of $12 million.
B) directly increased by $4 million and has the potential to be increased by another $12 million.
C) directly reduced by $4 million and has the potential to be reduced by another $12 million.
D) directly increased by $4 million and has the potential to be increased by another $8 million.