Multiple Choice
If the required reserve ratio is 20 percent and the Fed buys a $10,000 security from a depository institution that currently has no excess reserves,what happens to the money supply,using the simple multiplier?
A) Nothing.
B) It increases by $5,000.
C) It decreases by $5,000.
D) It increases by $50,000.
E) It decreases by $50,000.
Correct Answer:
Verified
Correct Answer:
Verified
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