Question

The money supply in Macroland is currently 2,500, bank reserves are 200, currency held by public is 500, and banks' desired reserve-deposit ratio is 0.10. Assuming the values of the currency held by the public and the desired reserve-deposit ratio do not change, if the Central Bank of Macroland wishes to increase the money supply to 3,000, then it should conduct an open-market ______ government bonds.

Answer 1

Answer: purchase of 50

Step-by-step explanation:

Open market operations is used when the central bank either buys or sells government securities. This is done in order to contract or expand the availability of money.

Based on the scenario in the question, if the Central Bank of Macroland wishes to increase the money supply to 3,000, then it should conduct an open-market buy 50 government bonds.