Suppose banks desire to keep 5 percent of all deposits on reserve,and the Fed sells $10 billion of government securities to Bank INF.As a result,
A) the maximum amount that deposits in the economy can increase is $10 million.
B) the maximum amount that deposits in the economy can decrease is $10 million.
C) the maximum amount that deposits in the economy can decrease is $200 million.
D) the amount of deposits in the economy cannot change.
E) the maximum amount that deposits in the economy can increase is $200 million.
Correct Answer:
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