Question
The central bank's financial statements are as follows: All units are expressed in Korean won. Assets Liabilities loan to goverment 50 Monetary base 100 loan
The central bank's financial statements are as follows: All units are expressed in Korean won.
Assets | Liabilities | ||
loan to goverment | 50 | Monetary base | 100 |
loan to bank | 0 | Government deposits | 100 |
Foreign assets | 2,000 | Foreign liabilities | 100 |
Government bonds and other assets | 250 | Other liabilities and equity | 2,000 |
Assume that the ratio of all private cash currencies (C/D) = 0.3 is constant. Let's say that the bank keeps Excess reserves/deposits=0.1 and the required reserve ratio is 0.1. It is assumed that only the United States exists for foreign country.
1. Suppose the central bank purchased 100 won worth of dollars in the foreign exchange market and purchased U.S. government bonds using the dollars purchased. How do central bank financial statements change? 2. How much is the increased amount of money? How much is the increased deposit? Indicate how a bank's financial statements change when there is only one bank. 3. Suppose the central bank issued monetary stabilization bond to recover the increased amount of money. How much is the amount of the issuance of monetary stabilization bond? How does the central bank's financial statements change at this time? 4. Let's say that the exchange rate has fallen and the dollar has fallen by 10%. If all categories are evaluated at the current won value through market price evaluation, how will the central bank's financial statements change? How does the amount of money change at this time?
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