If the required reserve rate is ten percent and banks do not hold any excess reserves and there are no changes in currency holdings, a $1 million open market purchase by the Fed will result in what change in loans:
A. No change.
B. A decrease of $1 million.
C. An increase of $10 million
D. An increase of $1 million.
Answer:C
If the required reserve rate is ten percent and banks do not hold any excess reserves and there are no changes in currency holdings, a $1 million open market purchase by the Fed will result in what change in loans:
A. No change. B. A decrease of $1 million. C. An increase of $10 million D. An increase of $1 million.