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5. The reserve ratio is 2 percent. If the Fed buys $1 million of U.S. government securities and the check is deposited in Bank A,
5. The reserve ratio is 2 percent. If the Fed buys $1 million of U.S. government securities and the check is deposited in Bank A, but Bank A increases its vault cash by the entire amount, then the money supply
a. increases by $1 million.
b. increases by $980,000.
c. increases by more than $1 million.
d. does not increase.
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