Suppose the State Bank purchases a Rs 1,000 government bond from you. If you deposit the entire Rs 1,000 in you bank what is the total potential change in the money supply as a result of the State Bank’s action if the your bank’s reserve ratio is 20 percent ?

Related Mcqs:

Money that a government has required has required to be accepted in settlement of debts is ?

A. barter money B. currency value C. legal tender D. commodity money...

According to the simple Keynesian view the aggregate supply curve is ?

A. downward sloping over all levels of output B. upward sloping over all levels of output C. horizontal until it reaches full capacity and then becomes vertical D. vertical until it reaches full capacity and then becomes horizontal...

Which of the following policy actions by a central bank is likely to increase the money supply ?

A. Increasing the refinancing rate B. All of these will increase the money supply C. Buying government bonds in open market operations D. Increasing reserve requirements...

If The Central bank tries to keep the interest rate constant when the economy is operating on the steep part of the AS curve, _________ will occur?

A. a hyperinflation B. a depression C. stagflation D. a recession...

Central banks prefer to fix the ____ and accept the resulting _____?

A. demand for money, interest rate B. interest rate equilibrium money supply C. demand for money equilibrium money supply D. interest rate, demand for money...