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Assume the Central Bank of Country A requires a reserve ratio of 9% and the banks in Country A are not holding any excess reserves
Assume the Central Bank of Country A requires a reserve ratio of 9% and the banks in Country A are not holding any excess reserves currently. The Central Bank now has a target to increase the economys money supply by $400 million.
A.Calculate the amount of bonds the government needs to buy from or sell to the market.
B.Assume that suddenly people prefer to hold more cash and keep less money in their bank accounts. How will this affect the result of the government action in the part A?
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