In Macroland, Currency Held by the Public Is 2,000 Econs

question 76

Multiple Choice

In Macroland, currency held by the public is 2,000 econs, bank reserves are 300 econs, and the desired reserve/deposit ratio is 10%.If the Central Bank prints an additional 200 econs and uses this new currency to buy government bonds from the public, the money supply in Macroland will increase from ______ econs to ______ econs, assuming that the public does not wish to change the amount of currency it holds.

• A)20,000; 22,000
• B)5,000; 2,000
• C)3,000; 5,000
• D)5,000; 7,000

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Definitions:

Equilibrium Price

The price at which the quantity of a product offered is equal to the quantity of the product in demand.

Tax Placed

The imposition of a financial charge or levy on an individual or a corporation by a government.

Deadweight Loss

A decline in economic efficiency resulting from the failure to achieve free market equilibrium for a good or service.

Total Revenue

The total amount of money a company generates from its business activities, often calculated by multiplying the price of goods or services by the quantity sold.