If the reserve ratio is 5 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed sells $30 million worth of government bonds, bank reserves
A) decrease by $30 million and the money supply eventually decreases by $600 million.
B) increase by $30 million and the money supply eventually increases by $600 million.
C) decrease by $30 million and the money supply eventually decreases by $150 million.
D) increase by $30 million and the money supply eventually increases by $150 million.
Correct Answer:
Verified
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