If the central bank buys government bonds from

individuals on the open market and banks do not

loan out any excess reserves created by the open

market purchase, which of the following will

happen?

(A) The money supply will increase.

(B) The money supply will remain unchanged.

(C) Loans to the private sector will increase.

(D) Demand deposits will decrease.

(E) The level of actual reserves will decrease.

need detail explanation