Exhibit 19-3 Balance sheet of Tucker National Bank
Assets
Liabilities
Required reserves$ 20,000
Checkable deposits$100,000
Excess reserves0
Loans 80,000
Total$100,000
Total$100,000
Assume all banks in the system started with balance sheets as shown in Exhibit 19-3 and the Fed made a $100,000 open market purchase. The result would be a(n):
A. $500,000 expansion of the money supply.
B. $100,000 expansion of the money supply.
C. $20,000 contraction of the money supply.
D. infinite expansion of the money supply.
Answer: A
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