A bank will often hold government securities as an asset.If a bank were to sell $100,000 in government securities to an individual who paid for the bond in cash and the bank placed this cash in their vault,by how much would the money supply change as a result?
A) There would be no change to the money supply.
B) It would increase by $100,000.
C) It would decrease by $100,000.
D) It would increase by $100,000 multiplied by the reciprocal of the required reserve ratio.
E) It would decrease by $100,000 multiplied by the reciprocal of the required reserve ratio.
Correct Answer:
Verified
Q90: Sam Black deposits the $5,000 in coins
Q91: If the required reserve ratio is 20%,what
Q110: Which of the following is true about
Q111: In reality,individuals do not deposit all of
Q112: A bank has excess reserves of $1,000,000
Q112: In a fiat money economy,money is created
Q113: If the required reserve ratio is 10%,what
Q115: _ is the phenomenon when one party
Q116: A bank will often hold government securities
Q117: To the extent a bank holds excess
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents