Suppose the Bank of Canada sells a member bank a $3,000 security, the desired reserve ratio is 20 percent, banks hold no excess reserves, and all loans are redeposited.How is the money supply affected?
A) The money supply increases by less than $15,000.
B) The money supply decreases by less than $15,000.
C) The money supply increases by $15,000.
D) The money supply decreases by $15,000.
Correct Answer:
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