Question: MULTIPLE CHOICE (identify the one best answer below and provide a justification for each of the five options ): Suppose $40 coming from a foreign

MULTIPLE CHOICE (identify the one best answer belowand provide a justification for each of the five options): Suppose $40 coming from a foreign country is deposited in a domestic bank. Assuming that the reserve ratio of banks is 5%, and that there are no leakages from the multiplication process (other than the reserves), the money supply in the economy increases by:

a.An amount X that is more than $1,000.

b.An amount X that is between $600 and $1000.

c.An amount X that is between $300 and $600.

d.An amount X that is less than $300.

e.Money supply actually decreases, not increases.

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