Scenario 13.2 Assume the Following Conditions Hold

Multiple Choice

Scenario 13.2 Assume the following conditions hold.
Now the Federal Reserve engages in an open market operation by purchasing $1 billion worth of government bonds from private bond dealers, who then deposit the $1 billion in the banks.This acts to lower the equilibrium interest rate by 2 percent. Refer to Scenario 13.1.What is the ultimate change in the money supply following the open market operation by the Fed?

A) -$3 billion
B) -$0.33 billion
C) +$1 billion
D) +$2.01 billion
E) +$5.2 billion