Assume that u. s. national bank has no excess reserves and that the reserve ratio is 20 percent. if u. s. national borrows $5 million from a federal reserve bank through a repo transaction, it can expand its loans by a maximum of
a) $1 million.
b) $0.
c) $25 million.
d) $5 million.

D) $5 million

Explanation:

A repurchase (repo) transaction is a short term loan between entities that trade government securities. The agreement involves selling a government security on an overnight basis and then buying it back the next day. The price of the next day transaction is slightly higher than the original selling price, generating a profit for the original buyer.

answer(b) revenue account which increases;

answerboth the short run phillips curve and the aggregate demand and aggregate supply model