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    Modern Principles of Economics Study Set 2
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    Exam 32: Inflation and the Quantity Theory of Money
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    Suppose the Reserve Ratio Is 20 Percent for All Banks
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Suppose the Reserve Ratio Is 20 Percent for All Banks

Question 15

Question 15

Multiple Choice

Suppose the reserve ratio is 20 percent for all banks. If the Fed increases bank reserves by $200, then the money supply will


A) decrease by $400.
B) increase by $400.
C) decrease by $1,000.
D) increase by $1,000.

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