The reserve ratio is 10 percent. If the Fed buys $1 million of U.S. government securities from a bond dealer by transmitting the funds to the dealer's deposit account at Bank ABC, then
A) Bank ABC can make no additional loans.
B) Bank ABC can make additional loans up to $900,000.
C) Bank ABC can make additional loans up to $1 million.
D) Bank ABC cannot make any additional loans, but the system as a whole can make additional loans up to $1 million.
Correct Answer:
Verified
Q403: The Fed sells $1 million in bonds
Q404: When the Fed sells a U.S. bond
Q405: When the Fed buys government securities
A) reserves
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Q407: Open market operations are
A) the buying and
Q409: The Federal Reserve will engage in open
Q410: When the Fed buys a U.S. bond
Q411: The reserve ratio is 2 percent. If
Q412: When the Fed sells government securities
A) reserves
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