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s a result of the Fed's sale of $2,500 worth of government securities to First Main Street Bank, the bank becomes reserve deficient. Suppose that

s a result of the Fed's sale of $2,500 worth of government securities to First Main Street Bank, the bank becomes reserve deficient. Suppose that Juanita, a First Main Street Bank's customer, re-pays back the $2,500 loan she took out a few months ago. Which of the following most accurately describes First Main Street Bank's actions? The bank keeps the $500 as reserves. The bank creates a $297,500 loan. The bank keeps the $2,500 as reserves. The bank creates a $2,500 loan. The money supply in the economy is

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