In a simplified banking system in which all banks are subject to a 10 percent required reserve ratio, a $1,000 open market sale by the Fed to a bank would cause the money supply to:
A) increase by $1,000.
B) increase by $100,000.
C) decrease by $10,000.
D) decrease by $1,000.
E) remain unchanged.

Question

Quizplus · Accepted Answer

The Answer of In a simplified banking system in which all banks are subject to a 10 percent required reserve ratio, a $1,000 open market sale by the Fed to a bank would cause the money supply to:
A) increase by $1,000.
B) increase by $100,000.
C) decrease by $10,000.
D) decrease by $1,000.
E) remain unchanged.

In a Simplified Banking System in Which All Banks Are