If the required reserve ratio is 0.05 and the Fed sells a $2,000 bond directly to an individual who pays for it with a check,what will happen to the money supply?
A) The money supply will increase by $2,000.
B) The money supply will decrease by $2,000.
C) The money supply will increase by $100.
D) The money supply will decrease by $100.
E) The money supply will decrease by $200.
Correct Answer:
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