Economy’s entire money supply is $400,000 and required reserve ratio is 15%. As a result of the Fed's sale of $8,000 worth of government securities to First Main Street Bank, the bank becomes reserve deficient. Suppose that Charles, a First Main Street Bank’s customer re-pays back the $8,000 loan he took out a few months ago. Which of the following most accurately describes First Main Street Bank’s actions? a) the bank creates a $8,000 loan b) the bank keeps the $8,000 as reserves c) the bank creates a $52,000 loan d) the bank keeps the $1,200 as reserves The money supply in the economy is $______.

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