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adelina 88 [10]
2 years ago
8

If the central bank sells $10,000 in bonds to a bank that has issued $350,000 in loans and is exactly meeting the reserve requir

ement of 10%, the money supply _____.
Business
1 answer:
Scilla [17]2 years ago
8 0

The money supply will  be $100,000

Banks need to have a $ 10,000 reserve, so if you buy $350,500 with 4,444 bonds, you'll need to reduce your lending by $10,000 to make up for the difference.

A decrease in credit means a decrease in deposits at other banks. In other words, the excess reserve was initially zero, but after the bond is sold it will be minus $10,000,

. The money supply will be reduced by $10,000  x 1 / 0.1 = $100,000 .

Banking is a business that protects money for others. Banks lend this money and generate interest that benefits the bank and its customers. A bank is a financial institution that is allowed to accept deposits and make loans. However, we can also provide other financial services.

Learn more about Banking here: brainly.com/question/1115815

#SPJ4

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