What will happen to the money supply

Assignment Help Business Economics

Reference no: EM131092341

If the central bank sells euro 1 million of bonds and banks reduce their borrowings from the central bank by euro 1 ?million, predict what will happen to the money supply.

A. The monetary base would rise by euro 2 ?million, leading to an increase in the money supply

B. The monetary base would fall by euro 2 ?million, leading to a decline in the money supply

C. The sale of bonds would offset the reduction in borrowings so there would be no change in the monetary base and money supply

D. The effect on the money supply is ambiguous

Reference no: EM131092341

Questions Cloud

What ad-valorem tax would generate the same revenue : The following figure shows the demand and supply in a market, and the supply when there government decides to impose a specific tax and collect it from the producers. What ad-valorem tax (% collected from the producers revenue) would generate the sam..

Why does not economic theory apply to these organizations : In perfect competition, according to theory, all suppliers or consumers are price takers. In practice firms like Purdue Farms (chicken) or Jimmy Dean (sausage) bring a higher price than other brands. Why doesn’t economic theory apply to these organiz..

Short-run price elasticity of demand for gasoline : Studies have fixed the short-run price elasticity of demand for gasoline at the pump at -0.20. Suppose that international hostilities lead to a sudden cutoff of crude oil supplies. As a result, U.S. supplies of refined gasoline drop 10 percent. If ga..

Suppose there is broad increase in price of stocks : Suppose there is a broad increase in the price of stocks that causes an increase in the real wealth of individuals. Consumer spending rises in response to the increase in wealth. In the short run, this will cause

What will happen to the money supply : If the central bank sells euro 1 million of bonds and banks reduce their borrowings from the central bank by euro 1 ?million, predict what will happen to the money supply.

Dis-economies at the unit level and the firm level : This unit has talked largely about economies of scale at the plant or unit level. What do you see as the difference between the unit level economies of scale and the firm multiple plants, movie theaters, restaurants, etc. Is there a clear distinction..

Suppose the economy is producing at potential output : Suppose the economy is producing at its potential output. Now suppose that consumers and businesses become more pessimistic about the economic outlook. As a result, in the short run

Relation between price and total quantity : A community has four residents. The table shows the number of dental visits each resident will have. Calculate the total quantity demanded at each price. Then graph the relation between price and total quantity, with total quantity on the horizontal ..

Preferred use of the two fiscal tools to resolve gaps : What is your preferred use of the two fiscal tools (Tax or Spending) to resolve gaps? In your opinion who should receive the benefit or bear the cost of your fiscal tool(s)? Be specific.

User Account

All Pages