If the Fed Buys $10 Million of Government Securities When

Multiple Choice

If the Fed buys $10 million of government securities when the desired reserve ratio is 20 percent and the currency drain ratio is 5 percent, the quantity of money

A) increases by $50 million.
B) decreases by $50 million.
C) increases by $42 million.
D) decreases by $42 million.
E) increases by $7.5 million.