Suppose the State Bank purchases a Rs 1,000 government bond from you. – McqOptions

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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

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