If a bank receives $2,500 of reserves by selling a government bond to the Fed,its ability to make loans increases by $2,500.

Name: If a bank receives $2,500 of reserves by selling a government bond to the Fed,its ability to make loans increases by $2,500.
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When a bank receives reserves by selling a bond to the Fed, it can increase its loans by more than the reserve amount due to the fractional reserve banking system, which allows banks to lend out a multiple of their reserves.

If a Bank Receives $2,500 of Reserves by Selling a Government