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

question 80

Multiple Choice

Scenario 29-1.
The monetary policy of Namdian is determined by the Namdian Central Bank.The local currency is the dia.Namdian banks collectively hold 100 million dias of required reserves,25 million dias of excess reserves,250 million dias of Namdian Treasury Bonds,and their customers hold 1,000 million dias of deposits.Namdians 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 Namdia purchases 25 million dias of Namdian 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 Namdia change?

• A)200 million dias
• B)150 million dias
• C)100 million dias
• D)None of the above is correct.

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Definitions:

Margin Reduction

The decrease in the difference between the cost to produce a good or service and its selling price, often aiming to increase market competitiveness.

Backup Source

An alternative supplier or system used to ensure continuity in case the primary source fails or is unavailable.

Production Capacity

The maximum output that a manufacturing facility can produce under normal conditions, determined by available resources and constraints.

Overbooking Decision

A strategic choice made by companies, especially in hospitality and transportation, to sell more units than are available, based on anticipated cancellations.