Suppose the Federal Reserve System has a required reserve ratio of 0.20 and there are no excess reserves in the system. If the Open Market Committee buys $20 million of securities from the commercial banking system, the total lending capacity of the system
A. Decreases by $100 million.
B. Increases by $20 million.
C. Decreases by $20 million.
D. Increases by $100 million.
Answer: D
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