QUESTION $26$

Scenario $29-2.$

The Monetary Policy of Tazi is controlled by the country$$s central bank known as the Bank of Tazi. The local unit of currency is the taz. Aggregate banking statistics show that collectively the banks of Tazi hold $300$ million tazes of required reserves, $75$ million tazes of excess reserves, have issued $7,500$ million tazes of deposits, and hold $225$ million tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank.

Refer to Scenario $29-2.$ Suppose the Bank of Tazi purchased $50$ million tazes of Tazian Treasury Bonds from the banks. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much does the money supply change?

a$.625$ million tazes

b$.1,000$ million tazes

c$.1,250$ million tazes

d$.$ None of the above is correct.