In the simple deposit expansion model,an expansion in checkable deposits of $1,000 when the required reserve ratio is equal to 20 percent implies that the Fed

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According to the simple deposit expansion model, an expansion in checkable deposits is achieved by the Fed purchasing government bonds. In this case, the required reserve ratio is 20%, which means that the Fed needs to purchase bonds worth 5 times the expansion in deposits ($1,000/20% = $5,000). Therefore, the Fed would have purchased $200 in government bonds (5*$1,000 = $5,000 purchased). The correct answer is C.

In the Simple Deposit Expansion Model,an Expansion in Checkable Deposits