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Suppose the Federal Reserve buys $200 million of government securities. If the reserve-deposit ratio is 5 percent and the currency-deposit ratio is 20 percent, then
Suppose the Federal Reservebuys$200 million of government securities. If the reserve-deposit ratio is 5 percent and the currency-deposit ratio is 20 percent, then the quantity of money (M1)
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increases by $960 million.
decreases by $960 million.
increases by $168 million.
decreases by $168 million.
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