Table 29-1 Effects of an open-market transaction on the balance sheets of banks and the fed (in millions of dollars) In Table 29-1, if the required reserve ratio is 10 percent, what will happen to the money supply? Use the oversimplified money multiplier in your calculations.
A) The money supply will decrease by $100 million.
B) The money supply will decrease by $10 million.
C) The money supply will not change.
D) The money supply will increase by $10 million.
E) The money supply will increase by $100 million.

Question

Table 29-1 Effects of an open-market transaction on the balance sheets of banks and the fed (in millions of dollars)  In Table 29-1, if the required reserve ratio is 10 percent, what will happen to the money supply? Use the oversimplified money multiplier in your calculations.
A) The money supply will decrease by $100 million. 
B) The money supply will decrease by $10 million. 
C) The money supply will not change. 
D) The money supply will increase by $10 million. 
E) The money supply will increase by $100 million.

Quizplus · Accepted Answer

The Answer of Table 29-1 Effects of an open-market transaction on the balance sheets of banks and the fed (in millions of dollars)  In Table 29-1, if the required reserve ratio is 10 percent, what will happen to the money supply? Use the oversimplified money multiplier in your calculations.
A) The money supply will decrease by $100 million. 
B) The money supply will decrease by $10 million. 
C) The money supply will not change. 
D) The money supply will increase by $10 million. 
E) The money supply will increase by $100 million.

Table 29-1 Effects of an Open-Market Transaction on the Balance