Suppose the federal reserve carries out an open market purchase and increases bank reserves by $160,000. further suppose that reserve ratio is 10%. by how much is the money supply expected to change? select one:

a. $1.6 million
b. $160,000
c. $320,000
d. $17.6 million

a. $1.6 million

Explanation:

If bank reserves are increased by $160,000 and that the reserve to money supply ratio is 10% the increase in money supply is expected to be as follows:

Therefore, an increase of $1,600,000 in money supply is expected.

The answer is a.

answer; possession utility;

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