Question

d2Llangara.bc.ca 0 flix Homepage-Lgara College Pichmony -1221-006 -Principles of Macroeconomics The New Yorker Search result."+0 I Socratie Questrade accout Google Yahoo Goog Search Adoptable & Lost/Found Animals Online Check Your Understanding Assets Liabilities Required $100 Deposits $%1,000 reserves Loans Treasury bills $800 $400 Suppose this is the only bank and all money is held in this bank. There are no excess reserves. If the BOC makes an open-market sale of T-bills worth $50 to this bank, what will happen to the money supply after all adjustments are made? a) The money supply will increase by $50. b) The money supply will decrease by $50 c) The money supply will increase by $500. d) The money supply will decrease by $500. Mew as Text Download3 5 6 8 9 0 0

Answer 1

ANSWER:

Whenever the fed sells t bills , the money supply would always decrease as the money creation does not work when the $50 are taken from the money supply and therefore the money supply would decrease exactly by $50.

The correct answer is option b.