Assume that any money lent by a bank is deposited back in the banking system as a checkable deposit, and that the reserve ratio is 10%. Trace out the effects of a $100 million open-market purchase.
a) Increase in money supply by $90 million
b) Increase in money supply by $100 million
c) Increase in money supply by $110 million
d) Increase in money supply by $120 million
