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| 1. |
Suppose the State Bank purchases a Rs 1,000 government bond from you. If you deposit the entire Rs 1,000 in you bank what is the total potential change in the money supply as a result of the State Bank’s action if the your bank’s reserve ratio is 20 percent ? |
| A. | Rs 4,000 |
| B. | Rs 5,000 |
| C. | Rs 1,000 |
| D. | Rs 0 |
| Answer» C. Rs 1,000 | |