3859EconomicsMedium
Suppose the central bank purchases a government bond from a person who deposits the entire amount received from the sale in her bank the money supply will?
Arise by an amount that depends on the bank’s reserve ratio
Bfall by exactly the amount of the deposit as long as the bank does not change its reserve ratio
Cbe unchanged
Drise by less than the amount of the deposit
Correct answer
A. rise by an amount that depends on the bank’s reserve ratio
Explanation
The correct answer is rise by an amount that depends on the bank’s reserve ratio.