Scenario 29-1. The Monetary Policy of Salidiva Is Determined by the Salidivian

question 43

Multiple Choice

Scenario 29-1.
The monetary policy of Salidiva is determined by the Salidivian Central Bank.The local currency is the salido.Salidivian banks collectively hold 100 million salidos of required reserves,25 million salidos of excess reserves,250 million salidos of Salidivian Treasury Bonds,and their customers hold 1,000 million salidos of deposits.Salidivians prefer to use only demand deposits and so the money supply consists of demand deposits.
-Refer to Scenario 29-1.Suppose the Central Bank of Salidiva loaned the banks of Salidiva 5 million salidos.Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same.By how much would the money supply of Salidiva change?

• A) 60 million salidos
• B) 50 million salidos
• C) 40 million salidos
• D) None of the above is correct.

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