Answer the next question on the assumption that the legal reserve ratio is 20 percent. Suppose that the Fed sells $500 of government securities to commercial banks buys $500 of securities from individuals, who deposit the cash in checking accounts.

As a result of the above transactions, reserves in the banking system will:
A) remain unchanged
B) rise by $100
C) fall by $100
D) rise by $1000


A) remain unchanged