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

question 55

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 percent. 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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