Assume the legal reserve ratio is 25 percent and the Fourth National Bank borrows $10,000 from the Federal Reserve Bank in its district. As a result:

A.  commercial bank reserves are increased by $10,000.
B.  the supply of money automatically declines by $7,500.
C.  commercial bank reserves are increased by $7,500.
D.  the supply of money is automatically increased by $10,000.

FOORQUIZ ANSWER:

A.  commercial bank reserves are increased by $10,000.