Refer to the table. Suppose the legal reserve requirement is 10 percent and initially there are no excess reserves in the banking system. If the Fed wished to reduce the interest rate by 1 percentage point, it would:

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A. buy $10 of government bonds in the open market.

B.  buy $100 of government bonds in the open market.
C.  sell $100 of government bonds in the open market.
D. sell $10 of government bonds in the open market.

FOORQUIZ ANSWER:

A. buy $10 of government bonds in the open market.