AP Macroeconomics Question 173: Answer and Explanation
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12. Assume the reserve requirement is 5 percent. If the FED buys $4 million worth of government securities in an open market operation, then the money supply can
- A. increase by $1.25 million.
- B. decrease by $1.25 million.
- C. increase by $20 million.
- D. decrease by $20 million.
- E. increase by $80 million.
Correct Answer: E