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Assume That the Reserve Requirement Is 20% and the Federal

Question 42

Multiple Choice

Assume that the reserve requirement is 20% and the Federal Open Market Committee buys a $100,000 bond. The money supply

A) increases by a maximum of $100,000.
B) decreases by $100,000.
C) increases by a maximum of $20,000.
D) increases by a maximum of $500,000.

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