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When the Federal Reserve Injects New Reserves into the Banking

Question 21

Multiple Choice

When the Federal Reserve injects new reserves into the banking system,


A) the money supply will expand by more than the amount of the new reserves.
B) banks will hold more reserves, but the money supply will remain unchanged.
C) banks will loan out the reserves, but the money supply will remain unchanged.
D) the money supply will expand only if the reserves support commercial loans, rather than consumer loans.

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