Multiple Choice
Assume that a single commercial bank has no excess reserves and that the reserve ratio is 20 percent. If this bank sells a bond for $1,000 to a Federal Reserve Bank, it can expand its loans by a maximum of
A) $1,000.
B) $2,000.
C) $800.
D) $5,000.
Correct Answer:
Verified
Correct Answer:
Verified
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