2. In a particular economy, currency held by the public is 1,000 shekels, bank reserves are 200 shekels, and the desired reserve-deposit ratio is 0.2. what is the money supply? How is the money supply affected if the central bank prints 100 shekels and uses this new currency to buy government bonds from the public? Assume that the public does not wish to change the amount of currency it holds.

ECON MACRO
5th Edition
ISBN:9781337000529
Author:William A. McEachern
Publisher:William A. McEachern
Chapter14: Banking And The Money Supply
Section: Chapter Questions
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2. In a particular economy, currency held by the public is 1,000 shekels,
bank reserves are 200 shekels, and the desired reserve-deposit ratio
is 0.2. what is the money supply? How is the money supply affected
if the central bank prints 100 shekels and uses this new currency to
buy government bonds from the public? Assume that the public
does not wish to change the amount of currency it holds.
Transcribed Image Text:2. In a particular economy, currency held by the public is 1,000 shekels, bank reserves are 200 shekels, and the desired reserve-deposit ratio is 0.2. what is the money supply? How is the money supply affected if the central bank prints 100 shekels and uses this new currency to buy government bonds from the public? Assume that the public does not wish to change the amount of currency it holds.
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