An open market purchase creates ______ that banks will lend creating ________ and the quantity of money ________.
A)required reserves;bank deposits;decreases
B)excess reserves;bank deposits;decreases
C)excess reserves;bank deposits;increases
D)excess reserves;bank loans;decreases
E)required reserves;bank deposits;increases

Question

Quizplus · Accepted Answer

An open market purchase creates excess reserves that banks will lend, creating bank deposits and increasing the quantity of money in the economy. Therefore, the correct choice is C - excess reserves; bank deposits; increases.

An Open Market Purchase Creates ______ That Banks Will Lend