Show the effect of the central bank action

Reference no: EM132142123

Question: The European Central Bank (the ECB) buys bonds on the open market (from commercial banks).

a) Assume that banks In the eurozone initially have no excess reserves. What is the effect of the central bank's action on the amount of customer loans that banks In the eurozone can make?

b) Using the graph of the money market, show the effect of the central bank's action on the nominal Interest rate in the eurozone.

c) What is the effect of the central bank's action on the price level? Explain.

Reference no: EM132142123

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