Suppose that the interest rate is so low that banks currently refuse to make loans. An increase in the supply of high-powered money will
A) have no effect on the money supply if all the new high-powered money ends up as bank reserves.
B) have no effect on the money supply if all the new high-powered money ends up as cash in the hands of the nonbank public.
C) raise the money supply depending on banks reserve-holding ratio.
D) all of the above are correct.
Correct Answer:
Verified
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