Reserves $2500 | Deposits $10000Loans $6000
Investment $1500
Suppose the banking system has an excess reserve of $500 and the public does not hold cash.
18. Suppose the government buys $1000 worth of bonds from the commercial banks. If the total amount of loans of the banking system increases to $10000, the total amount of excess reserve will be _____ and the money supply will be _____.
A. $700...$14000
B. $1500...$10000
C. $700...$10000
D. $1500...$14000
ANS: A
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