Multiple Choice
The banking system currently has $100 billion of reserves,none of which are excess.People hold only deposits and no currency,and the reserve requirement is 10%.If the Fed lowers the reserve requirement ratio to 5% and at the same time buys $10 billion dollars of bonds,then by how much does the money supply change?
A) It rises by $800 billion.
B) It rises by $990 billion.
C) It rises by $1220 billion
D) None of the above is correct.
Correct Answer:
Verified
Correct Answer:
Verified
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