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Suppose the Bank of Montreal ( BMO ) buys a $ 1 0 , 0 0 0 government security from a securities dealer. BMO pays

Suppose the Bank of Montreal

(

BMO

)

buys a $

10, 000

government security from a securities dealer. BMO pays the dealer by increasing the demand deposit balance by $

10, 000 .

The money supply has

Multiple Choice

decreased by $

10, 000 .

increased by $

10, 000 .

increased by $

10, 000

multiplied sim the desired reserve ratio.

increased by

5

fold.

not been affected.

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