When the Fed buys a $20,000 bond from a bond dealer
A) reserves of the banking system increase by $20,000, but the money supply will only be able to increase by something less than this amount.
B) reserves of the banking system increase by $20,000, but the money supply can increase by more than $20,000.
C) reserves of the banking system remain unchanged, but the money supply increases by $20,000.
D) reserves of the banking system remain unchanged, but the money supply decreases by $20,000.
Correct Answer:
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