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:

Early Bird

A term typically used to describe someone who completes a task or arrives somewhere early, often to take advantage of benefits or discounts.

Intertemporal Price Discrimination

A pricing strategy where consumers are charged different prices for the same product or service based on when they choose to purchase or consume it.

Marginal Revenue

The additional income earned by selling one more unit of a good or service.

Profit Maximization

The process or strategy by which a firm determines the price and output level that returns the greatest profit.