Assume that the reserve requirement is 20% and the Federal Open Market Committee buys a $10,000 bond. The impact on the banking system is a(n) _____ in new reserves.
A) injection of $10,000
B) reduction of $50,000
C) injection of $50,000
D) injection of $2,000

Question

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When the Federal Open Market Committee buys a $10,000 bond, it injects $10,000 in new reserves into the banking system.

Assume That the Reserve Requirement Is 20% and the Federal