In a Fractional-Reserve Banking System with No Excess Reserves and No

Multiple Choice

In a fractional-reserve banking system with no excess reserves and no currency holdings,if the central bank buys $100 million of bonds,

A) reserves and the money supply increase by less than $100 million.
B) reserves increase by $100 million and the money supply increases by $100 million.
C) reserves increase by $100 million and the money supply increases by more than $100 million.
D) both reserves and the money supply increase by more than $100 million.