Suppose the required reserve ratio is 20 percent and the Federal Reserve purchases $4 million of Treasury bonds from commercial banks. As a result, the supply of money for commercial banks is:

Hint: Calculate the Monetary Multiplier and use the equation for "Increasing the Money Supply".

Group of answer choices

not immediately affected, but themaximum possible "increase in the money supply"is $20 million.

immediately increased by $4 million and the maximum possible "increase in the money supply" is $16 million.

immediately reduced by $4 million and the maximum amount the money supply could be decreased is $16 million.

immediately increased by $4 million and the maximum possible "increase in the money supply" is $20 million.