If the Fed Sells a Member Bank a $3,000 Security,the

Multiple Choice

If the Fed sells a member bank a $3,000 security,the required reserve ratio is 20 percent,banks hold no excess reserves,and all loans are redeposited,then the money supply (Hint: Compare what the banking system might have done if it had loaned at every opportunity; also include the initial transaction with the Fed.)

A) increases by less than $15,000
B) decreases by less than $15,000
C) increases by $15,000
D) decreases by more than $15,000
E) decreases by $15,000