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In Country Z, the required reserve ratio is 10 percent. Assume that the central bank buys $50 million in government securities on the open market
In Country Z, the required reserve ratio is 10 percent. Assume that the central bank buys $50 million in government securities on the open market and that this amount of money is deposited in retail banks.
- Calculate each of the following.
- The total change in reserves in the banking system
- The maximum possible change in the money supply
- Using a correctly labeled graph of the money market, show the impact of the central bank's bond action on the nominal interest rate.
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