Suppose an individual sells $500 worth of securities to the Fed and puts the proceeds of this sale under his mattress.Then,
A) the money supply will be unaffected.
B) the money supply will rise by $500.
C) the supply of high-powered money will rise by $500 but nothing will happen to the money supply.
D) demand deposits will rise by some multiple of $500,depending on the bank reserve-holding ratio.
Correct Answer:
Verified
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