Assume that the Reserve Bank of Australia (RBA) purchases $100 million worth of foreign assets Assume further that RBA sterilizes the foreign asset purchase with domestic asset sales of an equivalent amount Finally, assume both transactions affect the currency in circulation Choose the most appropriate option A The above actions have no net effect on Australia's money supply, but RBA's foreign assets increase by $100 million and domestic assets decrease by $100 million B The above actions increase Australia's money supply by $100 million, but RBA's foreign assets increase by $100 million and domestic assets decrease by $100 million C The above actions decrease Australia's money supply by $100 million, but RBA's foreign assets increase by $100 million and domestic assets decrease by $100 million D The effect on Australia's money supply is ambiguous, but RBA's foreign assets increase by $100 million and domestic assets decrease by $100 million E The above actions have no net effect on Australia's money supply, but RBA's foreign assets decrease by $100 million and domestic assets increase by $100 million

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Posted on Jul 02, 2024

Assume that the Reserve Bank of Australia (RBA) purchases $100 million worth of foreign assets. Assume further that RBA sterilizes the foreign asset purchase with

Assume that the Reserve Bank of Australia (RBA) purchases $100 million worth of foreign assets. Assume further that RBA sterilizes the foreign asset purchase with domestic asset sales of an equivalent amount. Finally, assume both transactions affect the currency in circulation. Choose the most appropriate option:

	A.	The above actions have no net effect on Australia's money supply, but RBA's foreign assets increase by $100 million and domestic assets decrease by $100 million
	B.	The above actions increase Australia's money supply by $100 million, but RBA's foreign assets increase by $100 million and domestic assets decrease by $100 million
	C.	The above actions decrease Australia's money supply by $100 million, but RBA's foreign assets increase by $100 million and domestic assets decrease by $100 million
	D.	The effect on Australia's money supply is ambiguous, but RBA's foreign assets increase by $100 million and domestic assets decrease by $100 million
	E.	The above actions have no net effect on Australia's money supply, but RBA's foreign assets decrease by $100 million and domestic assets increase by $100 million