Suppose the bank of Ghana purchases Ghc 180 million worth of Government of Ghana bonds to the public. ( a) With the aid of money market diagrams, explain how the money market will be affected. (b) Explain what will happen to the interest and show why the change in the interest rate will restore the money market back to equilibrium (c) Use the Keynesian Cross diagram to illustrate and explain how the goods market will be affected by this monetary policy.
Suppose the bank of Ghana purchases Ghc 180 million worth of Government of Ghana bonds to the public. ( a) With the aid of money market diagrams, explain how the money market will be affected. (b) Explain what will happen to the interest and show why the change in the interest rate will restore the money market back to equilibrium (c) Use the Keynesian Cross diagram to illustrate and explain how the goods market will be affected by this monetary policy.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose the bank of Ghana purchases Ghc 180 million worth of Government of Ghana bonds to the public. ( a) With the aid of
(b) Explain what will happen to the interest and show why the change in the interest rate will restore the money market back to equilibrium
(c) Use the Keynesian Cross diagram to illustrate and explain how the goods market will be affected by this
(d) Using your answer in part (iii) above can you conclude that the above monetary policy is contractionary? Explain.
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