Table 29-1 Effects of an Open-Market Transaction on the Balance

Multiple Choice

Table 29-1 Effects of an open-market transaction on the balance sheets of banks and the fed (in millions of dollars) After the transaction in Table 29-1 is completed, what happens to actual reserves, required reserves, and excess reserves? Assume the required reserve ratio is 25 percent.

A) Actual reserves increase by $10 million, required reserves increase $2.5 million, and excess reserves increase by $7.5 million.
B) Actual reserves decrease by $10 million, required reserves decrease $2.5 million, and excess reserves decrease by $7.5 million.
C) Actual reserves increase by $10 million, required reserves are unchanged, and excess reserves increase by $10 million.
D) Actual reserves decrease by $10 million, required reserves decrease by $10 million, and excess reserves are unchanged.