How would this change the incentive structure facing

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Reference no: EM1319205

Q. 1. Consider a world in that there is no currency also depository institutions issue only checkable deposits also desire to hold no excess reserves. The required reserve ratio is 20 percent (%). The central bank sells $1 billion in government securities. Illustrate what happens to the money supply? Give reasons to support your answer.

2. Some economists argue in favor of abolishing the government-sponsored deposit insurance. Do you agree or disagree with this argument? Write down a well-reasoned argument defending your stance. If deposit insurance were abolished, Elucidate how would this change the incentive structure facing depository institutions?

Reference no: EM1319205

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