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

question 264

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 purchases 25 million salidos of Salidivian Treasury Bonds from banks.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) 200 million salidos
• B) 150 million salidos
• C) 100 million salidos
• D) None of the above is correct.

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Definitions:

LLP

Limited Liability Partnership, a legal entity where some or all partners have limited liabilities, protecting personal assets from business debts and liabilities.

State Statute

A written law enacted by a state legislature or other governing authority.

Limited Partnership

A form of business organization that has one or more general partners who manage the business and have unlimited liability for the obligations of the business and one or more limited partners who do not manage and have limited liability.

Limited Liability Status

A legal status which limits the amount of financial loss and legal liability an individual's investment can incur to the amount invested in a corporation, protecting personal assets from company debts and obligations.