If the Reserve Ratio Is 10 Percent, Banks Do Not

Multiple Choice

If the reserve ratio is 10 percent, banks do not hold excess reserves, people hold only deposits and no currency, then when the Fed sells $10 million worth of bonds to the public, bank reserves

A) increase by $1 million and the money supply eventually increases by $10 million.
B) increase by $10 million and the money supply eventually increases by $100 million.
C) decrease by $1 million and the money supply eventually increases by $10 million.
D) decrease by $10 million and the money supply eventually decreases by $100 million.