Suppose the Desired Reserve Ratio Is 10 Percent, and the Bank

Multiple Choice

Suppose the desired reserve ratio is 10 percent, and the Bank of Canada buys a $5,000 security from a depository institution.How is the money supply affected, using the simple multiplier?  

A)  The money supply increases by $5,000. 
B)  The money supply decreases by $5,000. 
C)  The money supply increases by $50,000. 
D)  The money supply decreases by $50,000.