When a bank sells a bond and holds the proceeds as reserves, the money supply increases.

Name: When a bank sells a bond and holds the proceeds as reserves, the money supply increases.
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Question

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When a bank sells a bond and holds the proceeds as reserves, the money supply does not increase because the funds are not being used to make loans or purchase goods and services, which would circulate money through the economy.

When a Bank Sells a Bond and Holds the Proceeds