If the Reserve Ratio Is 15 Percent, and Banks Do

Multiple Choice

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $65 million worth of bonds to the public, bank reserves

A) increase by $65 million and the money supply eventually increases by $266.67 million.
B) increase by $65 million and the money supply eventually increases by $433.33 million.
C) decrease by $65 million and the money supply eventually decreases by $266.67 million.
D) decrease by $65 million and the money supply eventually decreases by $433.33 million.