For each of the following actions (tools used) by BSP: Tools: A. BSP purchases bonds B. BSP increases reserve requirements C. BSP sells dollars D. Government (through a chartered bank) deposits money at BSP E. BSP advances funds to banks (through chartered banks) at lower rediscount rate (bank rate) 1. Determine whether it is an expansionary policy or contractionary policy.
the remaining is problems letter D E and problem number 1 thank you bartleby
PROBLEMS
For each of the following actions (tools used) by BSP:
Tools:
A. BSP purchases bonds
B. BSP increases reserve requirements
C. BSP sells dollars
D. Government (through a chartered bank) deposits money at BSP
E. BSP advances funds to banks (through chartered banks) at lower rediscount rate
(bank rate)
1. Determine whether it is an expansionary policy or contractionary policy.
2. Analyze its impact on:
A. the supply of money; and
B. equilibrium interest rate and
C. the economy (i.e., production and spending)
Note: For this part, you have to illustrate the appropriate diagram (D-S diagram and the
corresponding changes/shifts in the money supply brought about by the policy) and
state what happens to equilibrium rate and quantity of money.
Sample answer:
A. contractionary policy
Equilibrium interest rate: increase
Equilibrium quantity of money: decrease
Impact on the economy: decrease production
and spending (consumption)
Problem number 1)
D) The Government (through a charted bank) deposits money at BSP is a contractionary monetary policy as the banks and government both deposit money BSP which keep as reserves and not included as money supply. It will reduce the money supply.
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