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 deposit creation of:
A. $9 million
B. $90 million.
C. $10 million.
D. $900,000.
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 deposit creation of:
A. $9 million B. $90 million. C. $10 million. D. $900,000.