uppose the public holds 30% of their money as currency and the rest as deposits in their banks. Moreover, the central bank requires banks to maintain a reserve-deposit ratio of 15%. What will be the change in the total money supply if the central bank buys $10 million of government bonds from the public and pays for them by creating money (round to the nearest decimal point)? a. The money supply will decrease by $51.3 million b. The money supply will increase by $51.3 million c. The money supply will increase by $24.7 million d. The money supply will increase by $66.7 million e. All of the answers here are incorrect.
uppose the public holds 30% of their money as currency and the rest as deposits in their banks. Moreover, the central bank requires banks to maintain a reserve-deposit ratio of 15%. What will be the change in the total money supply if the central bank buys $10 million of government bonds from the public and pays for them by creating money (round to the nearest decimal point)? a. The money supply will decrease by $51.3 million b. The money supply will increase by $51.3 million c. The money supply will increase by $24.7 million d. The money supply will increase by $66.7 million e. All of the answers here are incorrect.
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Monetary System
Section: Chapter Questions
Problem 2CQQ
Related questions
Question
2. Suppose the public holds 30% of their money as currency and the rest as deposits in their
banks. Moreover, the central bank requires banks to maintain a reserve-deposit ratio of
15%. What will be the change in the total money supply if the central bank buys $10
million of government bonds from the public and pays for them by creating money
(round to the nearest decimal point)?
a. The money supply will decrease by $51.3 million
b. The money supply will increase by $51.3 million
c. The money supply will increase by $24.7 million
d. The money supply will increase by $66.7 million
e. All of the answers here are incorrect.
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