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Question
The reserve ratio is 20 percent. If the Fed buys $1 million of U.S. government securities from a bond dealer by transmitting the funds to the dealerʹs deposit account at Bank ABC, then
A) Bank ABC can make no additional loans.
B) Bank ABC can make additional loans up to $800,000.
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.
Answer
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Related questions
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