The balance sheet below reflects Zee Bank after its purchase of $65 million in government securities from the Fed. Assume a required reserve ratio of 10%, that banks hold no excess reserves, and that all currency is deposited into the banking system.
Assets Liabilites and net worth Reserves $15 million Liabilities: Checking Deposits $150 million Loans $275 million Net Worth $205 Treasuries $65 million
How did the purchase of $65 million in government securities from the Fed affect the money supply? Choose one:
A. The money supply increased by $65 million.
B. The money supply increased by $650 million.
C. The money supply decreased by $650 million.
D. The money supply decreased by $65 million.
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