Which of the following statements regarding the money supply process is false?
A) Open market sales increase the supply of reserves, whereas open market purchases decrease the supply of reserves.
B) When the Fed makes a discount loan, reserves increase; when a discount loan is paid off, reserves decrease.
C) Depository institutions loan out excess reserves and, in the process, create money.
D) Any one institution can safely lend only its excess reserves.
Correct Answer:
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