Table 14.1Monetary Aggregates of the U.S. Financial SystemItemAmountCash held by public$250 billionTransactions deposits$1,000 billionRequired reserves$150 billionExcess reserves$0 billionU.S. bonds held by public$1,000 billionAssume an original balance sheet: Refer to Table 14.1. If the Fed changes the required reserve ratio to 10 percent, ceteris paribus, the lending capacity of the system would eventually
A. Increase by $500 billion.
B. Increase by $50 billion.
C. Decrease by $500 billion.
D. Decrease by $50 billion.
Answer: A
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