Assume that the reserve-deposit ratio is 0.2. The Federal Reserve carries out open-market operations, purchasing $1,000,000 worth of bonds from banks. This action increased the money supply by $2,600,000. What is the currency-deposit ratio?
a. 0.3
b. 0.5
c. 0.4
d. 0.2
Answer: A
FIN 201
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