If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the fed sells $25.5 million worth of bonds to the public, bank reserves
a. increase by $25.5 million and the money supply eventually increases by $382.5 million.
b. increase by $25.5 million and the money supply eventually increases by $170 million.
a. decrease by $25.5 million and the money supply eventually increases by $382.5 million.
a. decrease by $25.5 million and the money supply eventually increases by $170 million.