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Suppose the Federal Reserve Banks buy $8 in securities from the public. As a result of this transaction (Assume the required reserve ratio is 25

Suppose the Federal Reserve Banks buy $8 in securities from the public. As a result of this transaction (Assume the required reserve ratio is 25 percent)

a.

the supply of money will directly decrease by $8 and the money-creating potential of the commercial banking system will be unaffected.

b.

the supply of money will directly increase by $8 and the money-creating potential of the commercial banking system will increase by $24.

c.

the supply of money will be unaffected but the money-creating potential of the commercial banking system will increase by $24.

d.

the supply of money will directly increase by $2 and the money-creating potential of the commercial banking system will increase by $6.

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