Question

If the reserve requirement is 20 percent, banks hold no excess reserves, and the Federal Reserve purchases $100 million worth of bonds on the open market, how will the monetary base change?

a. It will decrease by $100 million.
b. It will increase by $100 million.
c. It will decrease by $20 million.
d. It will increase by $20 million.
e. It will increase by $500 million.

Answer 1

I think it’s e
20% of 100 million
=500 million