To help deal with the effect of Covid, the Government of Ecoland undertakes a major capital spending
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Question:
To help deal with the effect of Covid, the Government of Ecoland undertakes a major capital spending (infrastructure) program totaling$250 billion. To finance the spending, it sells$200 billion of new government bonds to the central bank and $50 billion to the public. The banking system of Ecoland has a desired reserve ratio of 8%.
Show the balance sheets (T-accounts) for the Public, Commercial Banks, and the Central Bank with the effect of the above policy on the money supply. Assume no cash drain.
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