Suppose the reserve ratio is 10 percent, banks are all loaned up, and people hold only deposits and no currency. When the Fed sells $20 million…

7. Suppose the reserve ratio is 10 percent, banks are all loaned up, and people hold only deposits and no currency. When the Fed sells $20 million worth of bonds to the public, bank reserves

A. increase by $20 million and the money supply eventually increases by $20 million. B. increase by $20 million and the money supply eventually increases by $200 million. C. decrease by $2 million and the money supply eventually increases by $20 million. D. decrease by $20 million and the money supply eventually decreases by $200 million. E. None of the above

Answer: D

Can someone explain the answer or show me the math and formulas to this?