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Question
The reserve ratio is 20 percent. If the Fed buys $1 million of U.S. government securities and the check is deposited in Bank A, but Bank A increases its vault cash by the entire amount, then the money supply
A) does not increase.
B) increases by $800,000.
C) increases by $1 million.
D) increases by more than $1 million.
Answer
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Related questions
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