If the reserve ratio is 15 percent,and banks do not hold excess reserves,and people hold only deposits and no currency,then when the Fed sells $65 million of bonds to the public,bank reserves
A) increase by $65 million and the money supply eventually increases by $266.67 million.
B) increase by $65 million and the money supply eventually increases by $433.33 million.
C) decrease by $65 million and the money supply eventually decreases by $266.67 million.
D) decrease by $65 million and the money supply eventually decreases by $433.33 million.
Correct Answer:
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