Suppose the banking system has no excess reserves and required reserves equal to 20 percent of checkable deposits.If the Fed sells $10,000 in securities to Joe Bankustomer,what is the most that checkable deposits in the banking system fall? (Hint: Compare what the banking system might have done if it had loaned at every opportunity; also include the initial transaction with the Fed.)
A) $2,000
B) $10,000
C) $20,000
D) $50,000
E) $500,000
Correct Answer:
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