Hello:

I got this answer wrong. the correct answer is a: 200 Millions dias. Can you help me? can you explain it? Thanks

Scenario 29-1.

The monetary policy of Namdian is determined by the Namdian Central Bank. The local currency is the dia. Namdian banks collectively hold 100 million dias of required reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury Bonds, and theircustomers hold 1,000 million dias of deposits. Namdians prefer to use only demand deposits and so the money supply consists of demand deposits.

Refer to Scenario 29-1 . Suppose the Central Bank of Namdia purchases 25 million dias of Namdian Treasury Bonds from banks. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply of Namdia change?

Selected Answer: c. 100 million dias Answers:

a. 200 million dias

b. 150 million dias

c. 100 million dias

d. None of the above is correct.