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.
c. decrease by $25.5 million and the money supply eventually decreases by $382.5 million.
d. decrease by $25.5 million and the money supply eventually decreases by $170 million.


d

Economics

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