1 Assume that there is a 25 percent reserve ratio and that the Federal Reserve b

Question

1 Assume that there is a 25 percent reserve ratio and that the Federal Reserve buys $200 million worth of government securities. If the securities are purchased from the public, then this action has the potential to increase bank lending by a maximum of:

A $600 million, and also by $600 million if the securities are purchased directly from commercial banks

B $800 million, and also by $800 million if the securities are purchased directly from commercial banks

C $600 million, but by $800 million if the securities are purchased directly from commercial banks

D $800 million, but only by $600 million if the securities are purchased directly from commercial banks

Explanation / Answer

$600 million, but by $800 million if the securities are purchased directly from commercial banks

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.