APMacro: Practice FRQ


FRQ_Icon

 

In Zathura, the required reserve ratio is 10 percent. Assume that the central bank sells $50 million in government securities on the open market. Calculate the total change in reserves in the banking system and the maximum possible change in the money supply. Draw a correctly labeled graph of the money market and show the impact of the central bank’s bond sale on the nominal interest rate. What is the impact of the central bank’s bond sale on the equilibrium price level in the short run? As a result of the price level change, are people with fixed incomes better off, worse off, or unaffected?

Arrows-02-june

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: